Tax Service Quality and Tax Compliance among Small and Medium Enterprises in North Rift Economic Block, Kenya: A Moderated Mediation Model of Government Trust and Social Value Orientation

Purpose: This study examined the moderated mediation effect of social value orientation and government trust on the relationship between tax service quality and tax compliance among small and medium enterprises (SMEs).

Methodology: Guided by a positivist research philosophy and explanatory design, the study sampled 393 SME owners/managers from a target population of 21,232 registered SMEs using a stratified sampling technique. Data was collected using a self-administered questionnaire, with the reliability and validity confirmed through Cronbach’s alpha coefficient of 0.7 and factor analysis. Data analysis involved descriptive and inferential statistics and multiple regression analysis using Andrew Hayes Process macro.

Findings: The results indicate that tax service quality, government trust, and social value orientation had a significant positive effect on tax compliance. Tax service quality significantly influenced government trust which mediated the relationship between tax service quality and tax compliance. Social value orientation moderated the nexus between tax service quality and tax compliance, government trust and tax compliance, and the indirect relationship between tax service quality and tax compliance via government trust. The conditional effects were stronger at higher levels of social value orientation.

Practical Implications: Enhancing tax service quality and fostering government trust are crucial strategies for improving tax compliance among SMEs. Moreover, incorporating social value orientation in tax policy design is vital for optimizing revenue collection.

Originality: This study provides new insights into the interplay between tax service quality, government trust, and social value orientation, offering a comprehensive understanding of their impact on tax compliance within the SME sector.