Analysis of Tax Compliance Among Smes in Tanzania:

Abstract

Understanding SMEs' knowledge of tax laws, rates, and penalties is essential for improving compliance. By integrating three key theories Planned Behavior Theory, Economic Theory, and Psychology Theory. The study took place in Njombe district council, Tanzania. Employing a quantitative approach, it gathered data from a target population of 1200 taxpayers, with a sample size of 300. Using Likert-scale questionnaires and a correlational research design, the study achieved systematic data collection and analysis. The study reveals that SMEs generally possess a strong understanding of tax laws and regulations, but there is room for improvement in comprehending the tax system's structure. Tax rules are perceived as complex, and confidence in declaring income to tax authorities varies. There is a common belief that tax officials provide inaccurate advice, underscoring the need for better education and communication. Regarding tax rates, SMEs do not find them excessively high, and the turnover tax is not seen as a major hindrance. However, the complexity of tax laws is a concern. Filing costs and tax calculation are generally not viewed as significant barriers. Taxation plays a critical role in government revenue and economic development, but challenges in compliance persist. This study conducted in Njombe Urban City Council, Tanzania, integrated multiple theories to understand the dynamics of tax compliance among Small and Medium Enterprises (SMEs). Findings emphasize the need for improved tax knowledge, better communication, simplified tax laws, and fair penalty structures. To enhance compliance, it is recommended to invest in taxpayer education, establish effective communication channels, simplify tax laws, review penalty structures, continue research, provide government support, and implement monitoring and evaluation mechanisms. These steps can significantly enhance tax compliance, bolster government revenue, and foster socioeconomic development in Tanzania