Assessment of Factors Affecting Tax Compliance in the Mining Industry in Zambia

Abstract

Multinational enterprises abuse transfer pricing to erode the country’s tax base by shifting profits to other jurisdictions thereby depriving the host country of revenue that would have been available for development. The study used a descriptive research design to assess factors affecting tax compliance in the Zambian mining sector. The target population was 106 transfer-pricing practitioners, tax consultants and ZRA Inspectors dealing with mines. The entire population was sampled in this study.The study collected primary data using an online-administered questionnaire involving the entire population. The study also analyzed secondary data and conducted one-on-one online meetings with industry experts. The data was analyzed using descriptive statistics. The study found that tax compliance costs in Zambia to be very high and that transfer pricing was a very complex tax concept with mean scores of 3.66 and 3.70 respectively. Additionally, the study found that Tax Authority was not aggressive in conducting compliance audits with a mean score of 3.3. Finally, the study found other factors affecting tax compliance included policy in-consistence and inadequate enforcement capacity. Keywords: Transfer pricing, Tax compliance DOI: 10.7176/RJFA/13-10-04 Publication date: May 31 st 2022