Reasons for Reluctance of Tax Payers in Paying Tax: The Tax System Used in Mbeya City- Tanzania

Abstract

The study explores on the reasons why persons (individuals, corporations) avoid to pay tax and economic impacts of unfair tax system. Three objectives were formulated to reveal the reality which was to (i) examine the features of tax systems to be not complied voluntarily (ii) the factors for resistance towards paying tax and (iii) economic effects of unfair tax imposed. The facts from the above formulated objectives were obtained by employing a case study research design. The study was carried in Mbeya City in which tax payers and tax collectors were researched by applying simple random and judgmental sampling techniques. More over primary and secondary data collections were used to gather the facts. The collected facts were analyzed descriptively and by using Pearson’s’ correlation coefficient and the results were most of tax systems are unfair, uneconomical, uncertain and non-convenient. Further results showed that persons resist paying tax voluntarily because of hurt (unfair) tax imposed and lack of frequent education provided on the importance of paying tax. Lastly it was found that unfair tax system lead into increase in cost of production, ceasing of business operations, less tax collection, illegal businesses, rampat tax evasion and avoidance.