Effectiveness tax reforms in the taxation of small and medium enterprises (SMEs) in Tanzania: a case study of Dar es Salaam region

This study was set out to assess the effectiveness of tax reform in taxation of SMEs in Tanzania. Despite the tax reforms that have been undertaken over a decade ago, SMEs tax contribution has remained low. The study intended to assess the impact of tax reforms on the taxation of SMEs and identify factors that cause their low tax contribution. Primary data were obtained from the respondents as a result of administering questionnaires to the SMEs operators who were selected by using street corner method of sampling approach. TRA officials and the general public were also interviewed to obtain supplementary primary data not covered by the administered questionnaires while management reports were used to obtain secondary data. Findings showed that the SME sectors is mostly dominated by micro and small business which have in operation for less than five years and pay tax in the first and second tax bands, large promotions of SMEs not audited and business operating outside the tax net caused low tax contribution to total tax revenue collections. Businesses managed by people whose level of education was higher than primary education indicated higher compliance while poor awareness of tax reforms among SME operators was attributed to poor attendance of taxpayers at education seminars conducted by TRA and education level possessed by the SMEs operators. Long term measures like introducing taxation subject to the education curricula, advocating transparency in expenditure to build trust of taxpayers to the government, reviewing tax bands and responsible ministries device fiscal policy incentives such as to entire SMEs pay tax one year after starting business need to take to enhance their growth and increased tax contribution.