Effect of Electronic Tax Service on Income Tax Compliance Among Retail Small and Medium Enterprises in Nairobi Central Business District, Kenya

Taxation serves as the primary source of government revenue in both developed and developing economies, providing financial independence from external aid. However, tax avoidance and evasion pose significant threats to this revenue source, with developing economies being the most affected. Income tax compliance remains a central concern for governments globally because it is critical to financing public goods and sustaining fiscal stability. Income tax reforms have been a key component of broader tax reform packages, such as the implementation of eTIMS and the widening of the income tax base to include other goods and services. Despite these reforms, overall tax revenue mobilization, including Income tax, remains low. This research aimed to determine the effect of electronic tax services on income tax compliance among retail Small and Medium Enterprises in Nairobi Central Business District, Kenya. This study was guided by the Ability‑to‑Pay Theory and the Unified Theory of Acceptance and Use of Technology. This study will use an explanatory research design. The target population was 3805 retail small and medium enterprises in Nairobi Central Business District, Kenya, and the sample size was 318 respondents out of the 362 questionnaires issued, resulting in an 87.8% response rate. The questionnaires collected primary data, and the analysis used both descriptive and inferential statistics. The study regression analysis found that electronic tax service had a significant positive effect on income tax compliance (β = 0.096, p = 0.034). The study recommends that policymakers at the Kenya Revenue Authority and the National Treasury prioritize continuous investment in the usability and accessibility of the iTax platform, ensuring system downtime is minimized and the interface is simplified for traders with limited digital literacy. Further studies should explore the influence of peer behaviour and social networks on income tax compliance within the same population.