Determinants of Tax Compliances among SMEs in Mwanza Region

Abstract

This study was conducted to analyze determinants of Tax Compliances among Small and Medium Enterprises (SMEs) in Mwanza region: A case study was at Buswelu ward in Ilemela district. The specific objectives were to assess the impact of taxpayers’ attitude on tax compliance, to assess the effect of tax education, the effect of tax rate and the effect of tax penalties on tax compliance. The study employed quantitative research approach, the study targets Small and Medium Enterprises (SMES) taxpayers, sample size was 175 among populace size 322 who were selected random at Buswelu ward. Data collected through questionnaires and analyzed through SPPS system version 20 were used in the analysis of the data collected. The study finding shows that tax payers perceived that there is no fairness in tax estimation and they do not trust that their tax contributions are used properly by the government. Also finding shows that tax education provides awareness to tax payers on the importance of paying tax, provides information to tax payers about guidelines and laws related to tax payments and services results into higher compliance levels, thus more of funds through revenue collection. This study concludes that tax payer’s attitude, tax education and tax rate are the significant predictors of tax compliance. Tax compliance can be improved if tax payers have positive attitude towards paying tax; perceptions that there is fairness in tax administration, The study recommends that the government should ensure equity in government spending, to ensure fairness in tax rate estimation, to ensure transparency and overcome the problem of corruptions and misuse of fund, also the study emphasized in provide education to tax payers through different means through trainings, seminars, workshops and programs through radio, television and social media, because it increases awareness of tax payers on tax payments. This brought trust to the government which in turn contributed in creating positive attitude of taxpayers to comply with tax filing, reporting and payments.