Analysis of Factors Influencing Tax Compliance and Non-Tax Compliance Among Small & Medium Enterprises:

Abstract

This research aimed to analyze the factors influencing tax compliance among Small and Medium-sized Enterprises (SMEs) in the Tanga Region. The study focused on gaining insights into the perspectives of taxpayers regarding factors affecting both tax compliance and non compliance. The specific objectives included assessing the level of knowledge of tax compliance laws and regulations among SME owners in the study area, identifying socio economic factors influencing tax compliance and non-compliance in Tanzania, and examining the roles of tax administration in promoting compliance and preventing tax evasion in the country. The study surveyed 334 SMEs out of a population of 2000 in Tanga Region, utilizing descriptive statistics to portray the knowledge level of tax compliance laws, examining tax morale, and identifying socio-economic factors influencing compliance. Quantitative research approach was employed to analyze the factors influencing tax compliance and non tax compliance among SMEs’ owners. The findings revealed that the majority of businesses in the study area were small-sized, predominantly led by males aged between 45 and 60 years. Additionally, it highlighted a lack of taxpayer education among many SMEs in the region. The analysis indicated a generally high morale to pay taxes, with medium-sized business owners displaying a more favorable attitude towards tax administration compared to their counterparts in small businesses. Factors influencing compliance included the impact of perceived equity and fairness of the tax system, perceived loopholes for tax evasion,changes to current government policies,Government spending perceptions of tax compliance,Tax audit in voluntary tax compliance , Tax awareness and knowledge were identified as positive contributors to tax compliance. The study recommends that the Tanzania Revenue Authority (TRA) enhances taxpayer education to boost compliance, improve tax collection methods to reduce associated costs, and address existing loopholes that may encourage non-compliance. Strengthening enforcement and conducting seminars on proper record-keeping related to income, expenditure, and tax filing were also suggested to enhance compliance