Attitude Towards Tax Compliance among SMES in Tanzania

The study aimed at profiling attributes articulating SMEs’ tax compliance in Tanzania.Asurvey strategy was used in data collection whereby a total of 158 SMEs were involved. Data were analyzed through factor reduction and descriptive statistics run for frequencies as well as percentages. Findings showed that issues articulating SMEs’ tax compliance include a feeling that business owners are paying a fair tax, when reasons for paying tax are well known among tax payers, simplicity of tax laws, nature of reporting requirements and tax rates or amount charged. When factors influencing SMEs’ attitude towards tax were classified, three groups were formed. E conomic factors , which include audit frequencies, compliance and non-compliance, meaning the same thing in terms of financial costs, penalties for non-compliance/severity of fine, financial implications, complexity of tax system, likelihood of being caught and levels of tax rates. Psychological factors had two variables, namely, equity and fairness; and tax exemptions. The last encompassed social factors including variables like rate of evasion of the other tax payers, the impact of tax compliance and public services provided by the government. In terms of priority, economic factors were the most relevant and constituted the highest score in terms of explained variance (34 %). This paper notes that as dynamic as human behaviour is, which is not easily predictable does the tax payers in changing time and space. Thus, findings from this study provide an indication of varying tax payers’ attitudes contingent to time and space as defined by rulings from the  government, tax policies as well as laws and implementation thereof by the tax authority. Additionally, it was found out that tax payers face several hurdles including poor skills and knowledge about tax; multiple taxation; cumbersome records and reporting procedures; stiff competition; timing for payments; and inapt tax officers’ behaviour(s). The study recommends that responsible institutions should simplify tax procedures, eliminate bureaucracies and educate tax payers for better tax compliance. Key words: Economic factors, psychological factors, social factors, SMEs, tax compliance, tax noncompliance