Attitude Towards Tax Compliance among SMES in Tanzania

Tumsifu Elly


The study aimed at profiling attributes articulating SMEs’ tax
compliance in Tanzania.Asurvey strategy was used in data collection
whereby a total of 158 SMEs were involved. Data were analyzed
through factor reduction and descriptive statistics run for frequencies
as well as percentages. Findings showed that issues articulating
SMEs’ tax compliance include a feeling that business owners are
paying a fair tax, when reasons for paying tax are well known among
tax payers, simplicity of tax laws, nature of reporting requirements
and tax rates or amount charged. When factors influencing SMEs’
attitude towards tax were classified, three groups were formed.
Economic factors, which include audit frequencies, compliance and
non-compliance, meaning the same thing in terms of financial costs,
penalties for non-compliance/severity of fine, financial implications,
complexity of tax system, likelihood of being caught and levels of tax
rates. Psychological factors had two variables, namely, equity and
fairness; and tax exemptions.
The last encompassed social factors including variables like
rate of evasion of the other tax payers, the impact of tax compliance
and public services provided by the government. In terms of priority,
economic factors were the most relevant and constituted the highest
score in terms of explained variance (34 %). This paper notes that
as dynamic as human behaviour is, which is not easily predictable
does the tax payers in changing time and space. Thus, findings from
this study provide an indication of varying tax payers’ attitudes
contingent to time and space as defined by rulings from the government, tax policies as well as laws and implementation thereof
by the tax authority. Additionally, it was found out that tax payers
face several hurdles including poor skills and knowledge about tax;
multiple taxation; cumbersome records and reporting procedures;
stiff competition; timing for payments; and inapt tax officers’
behaviour(s). The study recommends that responsible institutions
should simplify tax procedures, eliminate bureaucracies and educate
tax payers for better tax compliance.

Key words: Economic factors, psychological factors, social factors,
SMEs, tax compliance, tax noncompliance

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[ISSN 1821-7567 (Print)  & eISSN 2591-6947 (Online)]