Presumptive Tax System and its Influence on the Ways Informal Entrepreneurs Behave in Tanzania

Samboja Haji Hatibu Haji

Abstract


The paper provides an analysis of how the presumptive tax system in Tanzania influenced the ways in which informal entrepreneurs behave. The established presumptive income tax system is based on solid sector and fiscal policies, and effective legal and institutional systems. Whereas the absolute increases in presumptive tax revenues and SME behaviour changes have partly been contributed by improvement of the presumptive scheme system, the study suggests that overall government reforms, tax surveys and patrols, tax severance and tax audits: all have their contributions to these achievements. However, the relative contribution of presumptive tax to total tax has been low and insignificant despite the presumptive tax reforms. Many SME firms are still outside the TRA tax net, suggesting the existence of weaknesses in the existing presumptive tax system. There is a need to intensify effective presumptive taxation reforms for SME entrepreneurs through rationalizing turnover tax regime, monitoring and controlling factors influencing behavioural patterns of SMEs, promoting segments focused on education and service to drive voluntary compliance, and improving operational efficiency.

Keywords: SMEs, presumptive tax system in Tanzania

JEL Codes: H25, H26 and L26


Full Text:

PDF

References


Ačevska, B. 2002. Entrepreneurship under Difficult Circumstances: Factors Hindering SME Growth in the Republic Of Macedonia. South-East Europe Review for Labour and Social Affairs, 1: 109–122.

Ahmed, E. & Braithwaite, V. 2005. Understanding Small Business Taxpayers: Issues of Deterrence, Tax Morale, Fairness and Work Practices. International Small Business Journal, 23.

Allingham, M. G. & A. Sandmo. 1972. Income Tax Evasion: A Theoretical Analysis. Journal of Public Economics, 1: 323–338.

Coleman, C. & C. Evans. 2003. Tax Compliance Issues for Small Business in Australia. In N. Warren (ed.). Taxing Small Business: Developing Good Tax Policies for SMEs. Australian Tax Research Foundation:

Giampolo, A. & A. Santoro. 2007. Tax Enforcement for SMEs: Lessons from the Italian experience? Michigan E-journal of Tax Research [Online], 5(2): 225–243.

Machogu, C.G. & J.B. Amayi. 2013. The Effect of Taxpayer Education On Voluntary Tax Compliance, Among SMEs In Mwanza City- Tanzania. International Journal of Marketing, Financial Services & Management Research, 2(8).

Nakiwala, A. 2010. Tax Competencies, Compliance Costs and Income Tax Compliance among SMEs in Uganda. Master’s Dissertation. Kampala, Uganda.

Ofori, E. 2009. Taxation of the Informal Sector in Ghana: A Critical Examination. Master’s Dissertation, Kwame Nkrumah University of Science and Technology.

Plumley, A.H. 1996. The Determinants of Individual Income Tax Compliance: Estimating the Impacts of Tax Policy, Enforcement, and IRS Responsiveness (Publication 1916, Rev. 11–96). Washington, DC: Internal Revenue Service.

Pope, J. & H. Abdul-Jabbar. 2008. Tax Compliance Costs of Small and MediumEnterprises in Malaysia: Policy Implications.

Semboja, H. H. 2015. SMEs Social and Economic Impacts of the Presumptive Tax System Reforms in Tanzania. Department of Economics, UDSM, Dar es Salaam, Tanzania

TRA-UDSM. 2011. The Study of Informal Sector Presumptive Taxation in Tanzania 2010. Dar es Salaam: TRA Headquarters.

University of Dar es Salaam (UDSM). 2014. Poverty and Social Impact Analysis of Proposed Presumptive Tax in Tanzania Study. Dar es Salaam: World Bank Tanzania.

United Republic of Tanzania (URT). 2003. Small and Medium Enterprise Development Policy. Dar es Salaam: Ministry of Industry and Trade.

—. 2012. Budget Speech by the Minister for Finance Introducing to the National Assembly, the Estimates of Government Revenue and Expenditure for Fiscal Year 2012/2013. Dar er Salaam: Ministry of Finance.

—. 2013. Budget Speech by the Minister for Finance the National Assembly, the Estimates of Government Revenue and Expenditure for 2013/2014. Dar er Salaam: Ministry of Finance.

—. 2014. Budget Speech by the Minister for Finance the National Assembly, the Estimates of Government Revenue and Expenditure for 2014/2015. Dar er Salaam: Ministry of Finance.

Terkper, S. 2003. Managing Small and Medium-Size Taxpayers in Developing Economies. Tax Notes International, 13 January 2003.


Refbacks

  • There are currently no refbacks.