ABSTRACT This study identified and assessed factors leading to tax evasion and tax compliance in Tanzania,In the case of eligible traders in Mwanza city. The study specifically intended to identify and assess factors leading to tax evasion and tax compliance, moreover, the study intended to assess performance of revenue collections as a result of tax compliance and non-compliance. This explanation was assessed from randomly selected 60 eligible traders found in Mwanza. The study findings discovered that tax evasion in Tanzania still exist despite the fact that there are tax policy, reforms and strategies as catalyst to increase government revenues. Change of business name, closing business during inspection, none use of receipts, incorrect sales records and hiding other businesses were identified as ways used to evade taxes. Small returns from businesses, high tax rates, less returns from government spending ,unaware of tax matters, the need of high profits, irregular follow-ups from tax authorities and corrupt tax officers were identified and assessed as contributing factors for tax evasion. Moreover, it was observed that revenues are properly collected through the support and information provided by tax authorities as well as tax payers awareness on tax obligations despite the fact that non-compliance still exist.