Value Added Tax (VAT) compliance through use of Electronic Fiscal Device (EFD) in Tanzania : A case study of Musoma district in Mara

Abstract

This study investigated about Value Added Tax (VAT) compliance through use of Electronic Fiscal Device (EFD) in Musoma District in Mara Tanzania. The study specifically examine the effect of EFD in filling, remittance and refund process to VAT collection, the effectiveness and efficiency of EFD in VAT collection, the trend of VAT compliance before and after use of EFD. A total of 40 respondents from TRA staff and VAT registered traders were used. The sample category involved 1 ARM - Audit, 1 ARM- Debt Management and Compliance Monitoring, 6 operational Staff obtained through purposive sampling and 32 VAT registered traders. The study employed case study research designs, while the research approach involved qualitative and quantitative research techniques. The data were gathered through closed ended questionnaires and semi structured interviews. Data were analysed through quantitatively and qualitatively. Quantitative data was analysed by using SPSS version sixteen, descriptive and inferential statistic such as mean, standard deviation and pie chart were also used to present data. Qualitative data was analysed by using thematic and content methods and presented by statements. However, the data collected from interview still reveal that the use of EFD continue to face the challenge like lack of accountability and poor compliance to rules and regulation, lack of culture of paying tax voluntarily, ignorance and negligence of the VAT registered traders to comply with VAT Act together with its regulations. Moreover, data from interviews depicted various strategies for effective use of EFD in VAT collection like corroboration with other international agencies, improving the quality of the paper used in the EFD machine, educating taxpayers on the advantages of using EFD machine to their business and tax purpose in general, enforcement measures, provide motivation and incentives to employees and improve employee‟s wages and working conditions. The study is recommended to the TRA, Ministry of Finance and Economic Affairs and to the policy makers.