Attitude Towards Tax Compliance among SMES in Tanzania

Abstract

The study aimed at profiling attributes articulating SMEs ' taxcompliance in Tanzania.Asurvey strategy was used in data collectionwhereby a total of 158 SMEs were involved. Data were analyzedthrough factor reduction and descriptive statistics run for frequenciesas well as percentages. Findings showed that issues articulatingSMEs ' tax compliance include a feeling that business owners arepaying a fair tax, when reasons for paying tax are well known amongtax payers, simplicity of tax laws, nature of reporting requirementsand tax rates or amount charged. When factors influencing SMEs ' attitude towards tax were classified, three groups were formed.Economic factors, which include audit frequencies, compliance andnon-compliance, meaning the same thing in terms of financial costs,penalties for non-compliance/severity of fine, financial implications,complexity of tax system, likelihood of being caught and levels of taxrates. Psychological factors had two variables, namely, equity andfairness; and tax exemptions.The last encompassed social factors including variables likerate of evasion of the other tax payers, the impact of tax complianceand public services provided by the government. In terms of priority,economic factors were the most relevant and constituted the highestscore in terms of explained variance (34 %). This paper notes thatas dynamic as human behaviour is, which is not easily predictabledoes the tax payers in changing time and space. Thus, findings fromthis study provide an indication of varying tax payers ' attitudescontingent to time and space as defined by rulings from the  government, tax policies as well as laws and implementation thereofby the tax authority. Additionally, it was found out that tax payersface several hurdles including poor skills and knowledge about tax;multiple taxation; cumbersome records and reporting procedures;stiff competition; timing for payments; and inapt tax officers ' behaviour(s). The study recommends that responsible institutionsshould simplify tax procedures, eliminate bureaucracies and educatetax payers for better tax compliance.Key words: Economic factors, psychological factors, social factors,SMEs, tax compliance, tax noncompliance