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This study explores challenges facing tax collection from informal sector in Tanzania.
Specifically, the study aims to achieve the following objectives; to establish the factors
influencing willingness of informal enterprises to pay taxes, to establish the factors
hindering procedural tax obligations and to establish alternative mechanisms for
improving tax collection.
The study involved a total number of 98 respondents from 4 Blocks in Mwanza City
Council, of whom 88 were small and medium taxpayers. Other respondents were 3 tax
consultants, 6 tax officials and 1 Regional Manager from Domestic Revenue
Department (DRD) Mwanza Tax Region. The study used non probability sampling
where purposive and convenient sampling techniques were used to obtain the above
mentioned respondents from total population. Questionnaires were used as the main tool
of collecting data.
Findings of this study reveal that willingness of small and medium taxpayers to pay tax
depend on the tax morale, low transaction costs, a functioning tax administration and
capacity in auditing and monitoring tax payments from the small and medium
taxpayers. It was also revealed that rampant tax evasion by the small and medium
taxpayers is the result of lack of cordial methods of tax collection. The study also
reveals the importance of establishing an alternative mechanism to improve tax
collection from the small and medium taxpayers including the use of Public Private
Partnership (PPP), rationalizing tax rate and designing unique tax structure for informal
sector.
Lastly, the study recommends that there is a need to have the sector specifics strategy of
tax collection that will enhance tax collection from the informal sector so as to
minimize gap between the available tax revenue potential against the actual taxes
collected. |
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