Investor Perceptions and Tax Compliance of Manufacturing Small and Medium Enterprises in Kiambu County, Kenya

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Published Feb 17, 2026
https://doi.org/10.70907/3q4qzb70
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Vol. 20 No. 3 (2026): Research Beacon Journal

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Sammy Martin Martins
Moi University

Abstract

ABSTRACT
Tax compliance among manufacturing small and medium enterprises (SMEs) is a critical component of fiscal sustainability and corporate governance, especially in counties experiencing rapid industrial growth. This study examined the effect of investor perceptions on tax compliance among manufacturing SMEs in Kiambu County, Kenya. Specifically, it assessed the influence of perceived fairness of the tax system, perceived transparency of the tax system, and perceived risk of non-compliance on the tax compliance behavior of these enterprises. The study was grounded on Deterrence Theory, Equity Theory, and Legitimacy Theory, providing a comprehensive framework for understanding how behavioral and governance factors interact in shaping compliance. A descriptive research design was adopted, targeting the 1,753 active manufacturing SMEs in Kiambu County, with finance managers, tax managers, compliance officers, and internal auditors serving as the units of observation. Using Fischer’s formula, a sample of 326 SMEs was selected through stratified and simple random sampling to ensure proportionate representation of the agro-processing, textiles, and light manufacturing sectors. Data were collected using a structured questionnaire comprising Likert-scale items aligned to the study variables; validity was ensured through expert review and reliability assessed using Cronbach’s alpha. A total of 243 questionnaires were returned, yielding a 74.5% response rate. Quantitative data were analyzed using descriptive and inferential statistics. The model summary indicated strong explanatory power (R = .875; R² = .766), and ANOVA confirmed overall model significance (F (3,239) = 260.879, p < .001). All predictors were positive and significant: perceived fairness (B = .292, β = .405, p < .001), perceived transparency (B = .324, β = .323, p < .001), and perceived risk (B = .403, β = .227, p < .001). The study concludes that fairness, transparency, and credible enforcement operate as complementary levers of tax compliance, with fairness exerting the largest standardized effect. It recommends uniform and proportionate application of tax rules to strengthen fairness, clearer and timelier communication to deepen transparency, and a balanced enforcement approach that combines risk-based audits with taxpayer support to sustain voluntary compliance among manufacturing SMEs.

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This work is licensed under a Creative Commons Attribution 4.0 International License.

Author Biography

Sammy Martin Martins, Moi University

PhD, Kenya School of Revenue Administration

How to Cite
Martins, S. M. (2026). Investor Perceptions and Tax Compliance of Manufacturing Small and Medium Enterprises in Kiambu County, Kenya. Research Beacon, 20(3), 225-240. https://doi.org/10.70907/3q4qzb70

How to Cite

Martins, S. M. (2026). Investor Perceptions and Tax Compliance of Manufacturing Small and Medium Enterprises in Kiambu County, Kenya. Research Beacon, 20(3), 225-240. https://doi.org/10.70907/3q4qzb70

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