Assessiment of factors hindering effective tax compliance by small businesses in Tanzania:

Abstract

The study sought to establish factors that hinders effective tax compliance among Small and Medium Enterprises (SMEs) in Arusha city. Tax is an important stream of revenue for government’s development projects and therefore all efforts must be made by the governments to ensure that it accurately and efficiently collects revenues so as to facilitate its operations. Specifically, the study establishes the level of tax compliance among SMEs in Arusha. This study identified the variables to be Tax Education, Tax Knowledge, Size of SMEs, Tax Attitude, Tax information, Tax Enforcement and Tax Compliance. Descriptive survey was used in the study.Benefit,Ability to pay,the cost of service and the Allingham and Sandmo theories guided this study.The findings revealed that lack of tax information relating to tax compliance matters accounted to a great percent as a reason for non-compliance. Besides, the taxpayers strongly agreed that the taxation system in Tanzania needed improvement. By gaining an understanding of these underlying factors, TRA and as a result, the government will be able to make changes that will greatly improve taxpayers‘ tax compliance level, with the end result being increased government revenues, allowing the tax authority to give quality service to taxpayers and the government as a whole in providing more and improved utilities to the public.