Taxation problems in Tanzanian construction industry: the case of selected contractors in Dar es Salaam

This study is centred on taxation problems in Tanzanian construction industry. The Industry has been performing poorly and the government for the last five years has revoked the business licenses of some construction companies. The main objectives of this study were to assess taxation system in construction industry; to assess the impact of tax related factors (like high rates, management and administration of tax and knowledge of tax policy) to the construction industry. The main hypotheses where: High tax rates contribute to poor performance of construction industry; poor management of tax administration contributes to poor performance of construction industry and, lack of clear tax policy has resulted into poor development of construction industry. The study involved 36 construction companies in Dar es Salaam. A random sampling method was employed to interview 36 executives of the sampled companies. High tax rates were found to have significant association with poor performance of the construction industry. Respondents showed that they are comfortable with policy, management and administration of tax. However high tax rates were found to be increasing thus increasing running costs and therefore minimizing the anticipated profits. It is recommended that tax rates should comply with the principles of good tax system. This should go along with educating the general public on the whole process of taxation.