The Effect of Tax Compliance Costs on Financial Performance of Commercial Banks in Western Kenya

Abstract

The study examines the impact of tax compliance costs on the financial performance of commercial banks in Western Kenya. The study is set against the backdrop of a rapidly changing economic landscape in Kenya, where tax compliance costs have become a significant burden for commercial banks. The researcher reviews the literature on tax compliance costs and financial performance, and highlights the need for a study that examines the impact of tax compliance costs on financial performance in the context of commercial banks in Western Kenya. The study identifies the problem of high tax compliance costs as a significant challenge facing commercial banks in Western Kenya. The researcher notes that high tax compliance costs can lead to reduced financial performance, and highlights the need for a study that examines the impact of tax compliance costs on financial performance. The study reviews the relevant theories, including the Pecking Order Theory, Stakeholder Theory, and Agency Theory, and highlights their relevance to the study. The study uses a mixedmethods approach, combining both qualitative and quantitative methods. The researcher collects data from 180 managers of commercial banks in Western Kenya, and uses descriptive statistics, correlation analysis, and regression analysis to analyze the data. The researcher finds that tax compliance costs have a significant positive impact on financial performance, and highlights the need for commercial banks to manage their tax compliance costs effectively in order to improve their financial performance. The study concludes that tax compliance costs have a significant impact on financial performance of commercial banks in Western Kenya. The researcher recommends that commercial banks should manage their tax compliance costs effectively, and that policymakers should consider policies that reduce tax compliance costs in order to improve financial performance. The study contributes to the existing literature on tax compliance costs and financial performance, and provides insights into the impact of tax compliance costs on financial performance of commercial banks in Western Kenya. The findings of the study have implications for policymakers, regulators, and commercial banks, and highlight the need for effective management of tax compliance costs in order to improve financial performance.