SME taxpayers perceptions on tax compliance in Tanga City and Muheza District, Tanzania

Abstract

The present study assesses the perceptions of small and medium enterprises on factors affecting tax compliance in Tanzania. Where the research problem was based on low tax compliance as a result of increase in tax evassion. The study employed crosssectional research design with sample size of 160 respondents (Tax payers). A purposive non probability sampling and random probability sampling technique were used to choose respondents from the study area. Semi-structure questionnaire was used to capture intended information. Data collected were analyzed by descriptive statistics, logit Model and chi square-test. The findings on analysis of demographic characteristic of the SME Tax payers revealed that majority of respondents about 48.13 percent were between 40 and 51 years. The majority which was 55.6 percent of respondents had primary education. Meanwhile 51.2 percent of respondents were married. Moreover, the results revealed that 73.13 percent of respondents had business income between 500001 and 4500000 Tsh per month while 45.6 percent of respondents had 4-49 employees in their business. However majority of respondents agreed that the tax collected assists the government in provision of services. On the other hand the result shows that there is association between tax payer’s perception on tax rate, fines, government services delivery, and penalty towards tax compliance. Furthermore the result from logistic regression model indicated that if tax rate is perceived high by SMEs tax payers, tax compliance would decrease by 25.50%. Moreover, perception of SMEs tax payers on penalty was high; penalty would be expected to increase tax compliance by 46.99%. If the perception of SMEs tax payers on fine was high, fines would be expected to increase the tax compliance by 29.58%. If perception of SMEs tax payers on government service delivery was high the tax compliance would be expected to increase by 61.93%. The study recommends that, the government should inject tax education to the education curriculum from the primary level in order to increase tax awareness to the community and remove wrong perception prevailing in the society.