Tax compliance issues on small and medium sized enterprises sector in Tanzania; the case of small and medium sized enterprises sector in Tanzania

Tax compliance is serous and costly problem to SMEs in most developing countries. This study seeks to explore that tax compliance issues on SMEs in Tanzania. Thus, the study attempted to establish the key reasons of non-compliance and give out the suggested solution to problems that lead to non-compliance. In this study, the researcher used snowball sampling approach in order to include SMEs who operates outside to express their tax net i.e. informally. The questionnaires were used to allow respondents to express their tax views freely. The study uses both qualitative and quantitative methodologies to analyze the data. The study found out number of factors that cause non-compliance of SMEs with the tax law in Tanzania, these are: -lack of knowledge by the taxpayers, high tax charged to SMEs, lot of time required for tax computation, poor financial records, variation on turnover, corruption of some TRA officers, and liquidity problem. Furthermore, the study suggested possible solution to problems revealed. Non-compliance of SMEs in Tanzania with the tax is mostly caused by lack of tax knowledge and complexity of the tax law. Therefore, the tax authority could improve tax compliance through educating SMEs on tax matters and by being transparent.