The assessment of SMEs tax compliance in Tanzania: the case of Kinondoni tax Region

The problem of Tax compliance is old as taxes themselves. Characterizing and explaining the observed patterns of tax non-compliance and ultimately finding ways to reduce it are of obvious importance to nations around the world. The economics of tax compliance can be approached from many perspectives: it can be viewed as a problem of public finance, law enforcement, and organization design. Labour supply or ethics or a combination of all of these. Studying tax compliance has raised some confounding behavioral issues. In this research, we assessed the major theoretical and empirical findings in the recent tax compliance literature, focusing solely on Income tax, PAYE and VAT compliance. The existence of a tax system forces SMEs to give part of their income to the government as tax payments. Since some of persons dislike paying taxes, different strategies towards reducing non tax compliance emerged including simplification of tax schemes and provision of tax incentives. Therefore, the objective of this study was to assess the extent to which SMEs comply with tax obligation after the introduction of those simplified schemes. The methodology used in the study was to gather data's on range of variables related on tax assessed and tax payments. The data gathered were in respect of PAYE VAT and Income tax. Also guided questions interview was applied to get more insight on SMEs tax compliance. The study as evidenced through quantitative analysis demonstrated that SMEs are tax compliant. However, through qualitative analysis it was revealed that some of SMEs were left outside the tax net and hence became non tax compliant. It is therefore recommended that the government has to take deliberate measures that will broaden tax base so as to catch all SMEs left outside the net for the purpose of enhancing tax compliance and increasing tax collection.