ASSESSMENT ON FACTORS AFFECTING ELECTRONIC TAX COMPLIANCE AMONG SMALL AND MEDIUM ENTEPRISES

Abstract

This study investigates the factors influencing electronic tax compliance among Small and Medium Enterprises (SMEs) in Mbeya City Council, Tanzania. The research aims to assess the impact of taxpayers' attitudes, institutional factors, and technological factors on the compliance behavior of SMEs. Previous research shows that things like how complex the tax system is and how taxpayers view the tax process affect whether businesses follow tax rules. However, there isn’t much research specifically on electronic tax compliance in Mbeya. A cross-sectional survey design was employed, involving a sample of 333 SMEs. Data were collected using questionnaires and documentary reviews, and analyzed using descriptive and inferential statistics, including regression models. A cross-sectional survey research design was utilized. Descriptive statistics, including frequencies and percentages, were used to summarize the data, while multiple regression analysis was conducted to test the relationships between the independent variables (taxpayer attitudes, institutional factors, and technological factors) and the dependent variable (electronic tax compliance). The findings show that attitudes like taxpayer knowledge and perceptions of the tax system significantly affect compliance. Institutional factors, such as clear tax laws and compliance costs, also shape SME behaviors, while technological challenges, like limited computer skills and the cost of online filing, further influence compliance decisions. However, widespread adoption of electronic tax systems is hindered by low awareness, limited technology access, and high costs for SMEs. Based on these insights, the study recommends enhancing tax education programs to boost awareness, simplifying compliance processes, and increasing access to affordable technology. It concludes that improving tax education, lowering compliance costs, and providing technology access are essential for boosting electronic tax compliance among SMEs. The study suggests that the Tanzania Revenue Authority (TRA) should target these areas to support SME adoption of digital tax systems.