ASSESSMENT OF CHALLENGES AND OPPORTUNITIES OF VALUE ADDED TAX (VAT) PERFORMANCE IN TANZANIA

Abstract

Value added tax (VAT) systems present both significant challenges for implementation and compliance, as well as opportunities to enhance revenue collection and economic efficiency for governments. In regard to the foregoing provision, the current study assessed challenges and opportunities of value added tax performance in Tanzania. A case of Kinondoni tax region. The study therefore incorporated the following objectives; to find out key challenges facing VAT administration, to examine VAT policies in addressing challenges and to determine effectiveness of VAT administration in tax performance in Kinondoni tax region. The study used mixed research approach by incorporating both qualitative and quantitative approaches. Sample size of 195 respondents, including registered taxpayers as well as TRA employees were obtained from Kinondoni tax region. Data was collected through interviews and questionnaires, whereas, analysis of data encompassed both thematic analysis for qualitative data and statistical analysis for quantitative data. The study findings revealed that key challenges facing VAT administration and possible opportunities included; tax compliance burden, professional dependency and social influences and peer pressure among others. Also, the study established that the effectiveness of VAT administration was positively but insignificantly correlated with VAT performance. Conversely, the results showed a negative but also insignificant association between VAT policies and regulations and VAT performance, which denotes that there is a strong relationship between independent variables (policies and regulations and effectiveness of VAT administration) and the dependent variable (VAT performance). From the study findings, it is recommended that policy makers should invest in advanced technological solutions. This could include the implementation of a comprehensive digital tax management system that allows for online registration, filing, and payment of VAT