Dissertation (MA Business Administration)In Zanzibar, taxes are collected using a three tier system where three tax authorities are involved, namely; Tanzania Revenue Authority (TRA), Zanzibar Revenue Board (ZRB) and Zanzibar Municipal Council (ZMC). Due to that, business operators have feelings that, they were over taxed. This study, has investigated on the perceptions of small and medium business owners, on the practices of revenue collection in Zanzibar. The study specifically, was put in place to meet four objectives, namely; to explore the perceptions of SMEs owners on the practices of revenue collection, to understand the practices of revenue collection from point of view of SMEs operators, to investigate on the challenges facing the Zanzibar Revenue Authorities and to analyze the impact of the three tier tax system in revenue collection, on the performance of revenue collected. The study was approached by using a mixed research approach and adopted a cross-sectional descriptive survey design. It was conducted in Zanzibar because it is where the three tier tax system is exercised. Data were collected from SMEs operators, employees of tax authorities and from the management. Data were further analyzed by using both qualitative and quantitative methods. It was found out that, most of the SMEs had negative perceptions about the practices of revenue collection. These perceptions ranged from how collection of revenue by using the three tier system affected their business, the fairness of the tax system to the perceptions on the general feelings of the tax system. The study further uncovered that, Zanzibar collected multiple of taxes most of them falling under the category of indirect taxes. It is due to multiplicity of taxes and the three institutions which collected them that made taxpayers to feel that, they paid more than what they deserved. In addition to that, the study has come up with several complaints which SMEs owners considered unfair for their business operations, most notable being; high tax, complexity of the system, wastage of time and discrimination in the amounts of tax paid by different people. Furthermore, the study found out four challenges which faced revenue boards in discharging their duties. They are; lack of knowledge about taxes and revenue by taxpayers, taxpayers not making payments on time, compliance problem and incorrect information about businesses given by taxpayers. Finally, respondents evaluated negatively all the six indicators of a good tax systems evaluated in this study. That means, the three tier tax system exercised in Zanzibar has been evaluated as not appropriate and unfair. It was recommended that, the government should look for the possibility of reviewing and amending the tax laws as well as simplifying the tax collection system. It was also recommended to introduce the use of Electronic Fiscal Device (EFD) in all business transactions made by SMEs in order to do away with the malpractice of supplying incorrect information done by business operators. Furthermore, tax authorities in Zanzibar were advised to fast track services by introducing multiple tellers to serve taxpayers as well as to improve quality of services rendered to taxpayers. Finally, employees were highly advised to exercise and show work ethics, high level of integrity and trustworthiness in discharging their duties so that they keep away with corruptive suspicions.