FACTORS AFFECTING TAX COMPLIANCE AMONG SMALL AND MEDIUM ENTERPRISES IN TANZANIA

Abstract

Tax compliance refers to the degree to which taxpayers adhere to tax laws and regulations by accurately reporting income, claiming correct deductions, and paying taxes owed in a timely manner. The study examined factors affecting tax compliance among Small and Medium Enterprises in Tanzania. The following objectives were employed; to assess the impact of tax knowledge on tax compliance among SMEs in Kinondoni municipal, to evaluate the effect of tax system complexity on Tax compliance among SMEs in Kinondoni municipal and to assess the influence of enforcement measures on tax compliance among SMEs in Kinondoni municipal. The study employed quantitative approach, with a descriptive research design. Sample size for the study included 88 registered SMEs respondents within Kinondoni tax region, Dar es Salaam. Data was collected though questionnaires, whereas analysis involved simple descriptive statistics for frequencies, percentages, mean and standard deviation. From the findings, it was revealed impact of tax knowledge on tax compliance among SMEs in Kinondoni municipal had an average mean of 4.10 denoting that respondents highly agreed that there was a strong impact of tax knowledge on tax compliance among SMEs. Also, the results provided that the effect of tax system complexity on tax compliance among SMEs had an average mean score of 4.15, this indicates that a large number of respondents approved that there was an effect of tax system complexity on tax compliance among SMEs. Lastly, the findings established that influence of enforcement measures and tax compliance among SMEs in Kinondoni municipal recorded an average mean score of 4.05 which is comparatively to other provisions, indicating that enforcement measures relatively influence tax compliance among SMEs. Based on the foregoing findings, the study recommends that Tanzania Revenue Authority (TRA) and local government bodies should implement comprehensive tax education programs tailored for SMEs. These programs should cover basic tax principles, filing procedures, and the importance of tax compliance for economic development.