Factors Influencing Tax Compliance among Small and Medium Enterprises in Iringa Municipality, Tanzania

This study examined the factors influencing non-tax compliance among Small and Medium Enterprises (SMEs) in Iringa Municipality, Tanzania. The study specifically assessed the contribution of taxpayer education, tax rates and tax penalties to non-tax compliance among SMEs. The study was guided by the Theory of Reasoned Action and the Standard Deterrence Model. A quantitative approach and cross-sectional research design were adopted. The target population comprised 172 licensed hotels, restaurants and cafés operating in Iringa Municipality, from which 63 respondents were selected through stratified random sampling based on Slovin's formula. Primary data were collected through structured questionnaires, while secondary information was obtained from relevant literature and official reports. Data were analyzed using SPSS version 20 through descriptive statistics and multiple linear regression. The findings indicate that taxpayer education had a positive and statistically significant influence on tax compliance (β = 0.564, p = 0.021). Tax rates had a negative and statistically significant effect on tax compliance (β = −0.723, p = 0.000), indicating that higher perceived tax burdens were associated with lower compliance. Tax penalties also had a positive and statistically significant influence on tax compliance (β = 0.621, p = 0.043), suggesting that effective enforcement can strengthen compliance behaviour. The regression model was statistically significant (F = 22.533, p < 0.05) and explained 51.0% of the variation in tax compliance (Adjusted R² = 0.510). The study concludes that taxpayer education, appropriate tax rates and effective tax penalties are important determinants of SME tax compliance in the study area. It recommends sustained taxpayer education, fair and affordable tax rates, and consistent, transparent and proportionate enforcement of penalties.

accounting and finance

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