A Dissertation Submitted in Partial Fulfilment of the Requirement for the Award of Master of Laws in Commercial Law of the University of Mzumbe. 2013Most of the tax payers in Tanzania do pay tax without filing the annual returns and they always complain about paying more tax than what they think they are supposed to pay. This research focuses on the cause and effects of the taxpayers‟ failure to file the annual returns during tax assessment for tax liability. This research was done through interviews, questionnaire and schedules on the sample size of 120 respondents selected specifically from businessmen and women, noon business persons, people who were formally business people, tax consultants and TRA officials, but picked randomly within the group. From the research, it was found that, failure to file the annual return by the tax payer is caused by the two things; tax payers lack of knowledge on the law and procedure to be followed during their tax liability assessment and lack of enough fund to bear the costs for preparing the necessary documents necessary for the annual returns. Also, failure to file the annual returns has the effect to high tax being imposed on the tax payer At the end, the researcher recommends that the law should change in order to simplify the requirements for filing the annual returns to enable even the normal businessperson to file them. Secondly, the tax payers should be educated on the procedure required for them to follow during the period of tax assessment in order for them to have fair tax assessment. Thirdly, TRA to diversify its sources of collections on tax in order not to shift the whole burden to the business people. Fourth, TRA tax assessors should not unreasonably impose higher tax on the tax payers. Lastly, tax assessors should visit the tax payers before imposing tax liability on the tax payer. If these recommendations are followed, enough revenue will be collected for the government, business and investment will not be hindered as per Tanzania‟s tax policy.