Challenges of tax collection from informal sector in tanzania

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University of Dar es Salaam,
This study explores challenges facing tax collection from informal sector in Tanzania. Specifically, the study aims to achieve the following objectives; to establish the factors influencing willingness of informal enterprises to pay taxes, to establish the factors hindering procedural tax obligations and to establish alternative mechanisms for improving tax collection. The study involved a total of 90 respondents from Kinondoni Municipality, of whom 76 were informal enterprises. Other respondents were 3 tax consultants, 10 tax officials and one manager from Domestic Revenue Department (DRD). The study used stratified sampling to obtain the above mentioned respondents from total population. Questionnaires were used as the main tool of collecting data. Findings of this study reveal that willingness of informal enterprises to pay tax depend on the tax morale, low transaction costs, a well-functioning tax administration and capacity in auditing and monitoring tax payments from the sector. It was also revealed that rampant tax evasion at this sector is the result of lack of cordial methods of tax collection. The study also reveals the importance of establishing an alternative mechanism to improve tax collection at the informal sector including the use of Public private Partnership (PPP), rationalizing tax rate and designing unique tax structure for informal sector. Lastly, the study recommends that there is a need to have the sector specifics strategy of tax collection that will enhance tax collection from the informal sector so to minimize gap between the available tax revenue potential against the actual taxes collected.
Available in print form, East Africana Collection, Dr. Wilbert Chagula Library, Class mark (THS EAF HJ3047.K57)
Domestic Revenue Department, tax collection, informal sector, Kinondoni Municipality, Tanzania, Public private Partnership
Kirenga, Ph. P (2012) Challenges of tax collection from informal sector in tanzania, Master dissertation, University of Dar es Salaam. Dar es Salaam