Factors Affecting Legal Compliance by Small and Medium Enterprises in Tanzania

Abstract

Majority of SMEs in the nation are not registered by the government through the correct process, and so go unnoticed and pay no tax, according to the NBS study (2019), which indicated that 51.5 percent were not registered, while 48.5 percent were registered. It is therefore, intention of the researcher to examine factors particularly affecting legal compliance by small and Medium enterprises in Tanzania particularly BRELA. Specific objectives of this study were: to determine the effect of user training on legal compliance of SMEs in Tanzania, to ascertain the effect of fines and penalties on legal compliance of SMEs in Tanzania and to assess the effect of systems automation on legal compliance of SMEs in Tanzania. Theory of Allingham and Sandmo and the Morale Theory were adopted in this study. The descriptive research design was adopted in this study and both the quantitative approach to research and the qualitative approach was adopted to complement one another. To accomplish the study's objectives, the researcher selected 140 officials from BRELA – Dar es Salaam and the researcher used a simple random sampling to select a sample size. For data collecting, the study relied on both primary and secondary sources. Primary data was collected using a structured questionnaire and interview. Secondary data was acquired from a variety of sources, including newspapers, current case reports, administrative files, press announcements, financial surveys, and online multimedia resources. The data acquired in this investigation was quantitatively and qualitative analysed. To analyse quantitative data using descriptive and inferential statistics, the Statistical Package for Social Sciences (SPSS) version 26 was used as a data analysis tool. Also, qualitative data was analysed using content analysis. The data findings were presented using figures and tables. Results of this study showed that, SMEs user training is a key determinant of legal compliance and user training has increased the SMEs capacity to utilize BRELA’s new technologies and methods for business registration. Findings indicated that fines and penalties improve legal compliance of SMEs while complexities in existing in fines and penalties strategy decreases legal compliance. Findings designated that automated systems simplify legal compliance for SMEs and automated systems are cheap as compared to traditional systems and automated systems have facilitated the streamlining of BRELA’S administrative process and automated systems have reduced the period of time consumed for business registration. The study concluded that user training has positive and significant effect on legal compliance. Also, this study concludes that fines and penalties have positive and significant effect on legal compliance. Moreover, the study concludes that automated systems positive and significant effect on legal compliance. The study recommends future research on the efficiency of BRELA's digital systems in enhancing company registration and licensing procedures is proposed