Abstract:
The main objective of the study was to investigate the factors affecting the acceptance of the
digital tax system on Tax compliance amongst small and medium enterprises within TRA-
Tanga. The study was based on three specific objectives such as the technology of the digital
tax system on taxpayers amongst small and medium enterprises, the Modes of payment of tax
obligations of digital tax system knowledge on taxpayers amongst small and medium
enterprises and the electronic tax filing of using a digital tax system on tax compliance and
their possible solutions amongst small and medium enterprises. Most SMEs fail to register
their businesses for tax reasons and mostly operate without licences from both national and
county governments. Therefore, tax compliance is a matter of great concern for all SMEs.
Furthermore, a lot of money is generated from SMEs operations on a daily basis, although the
majority are considered hard taxpayers. This research was informed by the innovation
diffusion theory and technology acceptance theory. The study used a descriptive research
design. The target population was all 1540 SMEs operating in Tanga Region. Stratifies
random sampling was used to derive 155 respondents, which was used as the sample. Out of
the 155 questionnaires issued, 133 were successfully filled and returned, translating to a
response rate of 85.8 %. The inferential statistics were undertaken by performing on factors
affecting acceptance of the digital tax system on compliance amongst small and medium
enterprises within TRA-Tanga. The study found p-values of 0.000 at a 95% level of confidence
in the association between digital tax and tax compliance by SMEs. This shows that the model
adopted for this study was significant and that digital tax significantly improves tax compliance.
It can be concluded that an increase in the utilisation of the resources in the digitised TRA tax
system, such as real-time and data analytics enables SMEs to promptly make remittances,
thus protecting them from potential consequences associated with noncompliance. The study
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recommends that TRA should develop training programmes for SMEs to equip them with
additional knowledge on the digitised tax administration system. SMEs should be educated on
how to use the TRA portal and sensitised on the different resources available in the platform
for full and effective utilisation.
