Determinants of Tax Compliance among Small and Medium Enterprises in Tanzania: Insights from Ilala Municipality

Abstract

This study investigated on Determinant of tax compliance among Small and Medium Enterprises in Tanzania specifically Ilala municipality, Particular objectives included evaluating the influence of economic factors and taxpayer personal demographics on tax compliance. The descriptive cross-sectional survey design and quantitative research approach were used in the current study. The study's population consisted of 5324 Small and Medium Enterprises from Ilala Municipality, from where a random sample of 98 respondents was drawn. Structured questionnaires were used to collect data, which was then analyzed using The Multiple Linear Regression, which provided a comprehensive proof that helped to answer the research questions. The study's findings demonstrated a positive and statistically significant association between the study independent variables and the dependent variable. Taxpayer, economic, and institutional factors all influence taxpayers' willingness to engage in tax evasion, according to the regression analysis. Study findings reveal that all taxpayer predictors, including economic and institutional factors, have a significant impact on tax compliance since all have mean of above 3.0. Furthermore, regression analysis supports the findings, since all three factors were found to have a significant impact on tax compliance, with p-values less than the 0.05 cutoff limit. The study concludes Tax morality can help increase voluntary tax compliance on the country through this taxpayer will have a positive perception toward government spending. Maintaining tax fairness, appropriate and moderate levels of penalty, and keeping tax rates as low as possible can all foster taxpayers' voluntary compliance. Fairness in the execution of tax regulations should be enshrined, and tough measures to combat tax revenue corruption should be implemented.