Abstract:
Small and Medium Enterprises (SMEs) are unique phenomena for the tax system, besides the wage earners, who are only subjected to income tax withholding; they form the bulk of taxpayers in the tax net. At the same time small businesses are the major contributors to the informal economy resisting tax payment and operating outside the tax net. This study aims at evaluating the SMEs constraints towards tax payment in local government authorities.
In order to carryout out this study, the researcher used a case study design, where Kilwa district council was chosen because is familiar place by the researcher as an employee of the district council hence easy of getting required information. The researcher collected two types of data, the primary data and the secondary data. Primary data were collected through questionnaire, interview and observation while secondary data were collected through documentary review. All data were analyzed and presented in tables and figures with the help of descriptive analysis under SPSS.
The findings shows that SMEs feel they pay high tax rates regardless of their business size and receive a little return on the tax paid. This has impacts on their willingness to pay tax and contributes to eroding people’s trust in the local governments’ capacity to provide the expected services. Moreover the lack of confidence on the use of government money and the methods and procedures taxes are collected affect SMEs’ perceptions towards taxation. Uncompromising and non-transparent approaches to collect taxes, fees and charges which are also many, may actually foster tax evasion and disrespect of tax laws.
The study therefore concludes that it is imperative to establish mechanisms for improving relations between the local revenue collection and the taxpayers (SMEs). Relevant measures being establishing more accessible and transparent payment facilities, certainty of tax payment dates and use fair and reasonable tax enforcement.
