The impact of imposing taxes to the local small and mediam enterprises operating in Tanzania (A comparative Study Between Formal and Informal SME’s)

The main objectives of the study was to examine the Impacts of imposing Taxes to the local Small and Medium Enterprises operating in Tanzania. The impacts of taxation on small business becomes more eminent due to the fact that, majority of small business in developing countries have chosen to remain informal due to poor taxation system and also to avoid tax burden. The study used the case study design to reveal the necessary and required data to answer the research questions. Also the study involved the use of both Quantitative and Qualitative methods. The research based on descriptive design and in particular the cross-sectional studies, this was because the research problem was relatively clear. This study was a single time period research and therefore whatever information obtained was specific for the time of the study. This design also ensures that the selected samples statistically represent the entire population. Both primary data such as interview and questionnaires, and secondary data such as books, journals and reports were collected and analyzed. The study noted that poor taxation system, unclear tax approximations, multiplicity of taxes and even unclear tax collections procedures as the main challenges to most of the local business so the study have came with recommendations on trainings small business operators on the importance of complying with taxes, also train them on the importance of formalizing their businesses. Reviewing taxation policies specifically to small businesses by simplification of taxes, reduction of profit insensitive taxes, reduction/exemption in payroll taxes, adjustment on skill and development levy and reduction on capital gain taxes from SME.