Many developing countries including Tanzania have been taking various measures to increase their public revenues through collection of taxes. These efforts have not been very successful and one problem has been tax evasion that significantly reduces government revenues. This study examined the causes of tax evasion and tax avoidance and how these actions cause a low level of compliance in terms of filing returns and payment of correct taxes on time. The study also marked factors influencing self-compliance of the taxpayers as well as the factors which lead the taxpayers to arrange for tax evasions. Some of these factors were categorized as economic deterrence, fiscal exchange, social influences, comparative treatments and political legitimacy. To attain this objective, the research was designed as purposive research. Data collection methods such as questionnaires, interviews, and observations were used during the research work. Also, the researcher used random sampling in selecting respondents from a population. The analysis of collected data helped the researcher to find out that poor interpretation of tax laws by the taxpayers, unsteady economy, lack/ low motivations to compliant taxpayers, complicated tax procedures, low level of enforcements, poor tax collection technology, narrow tax base, outdated tax laws and minimum punishment to evaders are the major reasons for tax evasion in Tanzania. However, the researcher suggested various solutions which if well implemented; they may reduce evasion practices and tax incompliance. The researcher recommended the government to invest in tax through TRA. Frequent training and awareness programs should be conducted to improve tax and taxation knowledge to TRA staffs and the public at large. Also, the government should be keen in spending the tax revenues to bring visible effect so that the taxpayers can see the effect brought by their tax. Furthermore, tax laws should be updated to fill the gaps that would otherwise lead to tax evasion. Lastly, stiff punishment should be charged to all tax evaders.

A Dissertation Submitted to Mzumbe University – Dar es Salaam Campus College in the partial Fulfillment of the Requirements for Award of the Degree of Master in Accounting and Finance (MSc. A&F) of Mzumbe University.