The impact of tax policies that affect the compliance of SMEs

Author

Makurutira, Praise

Title

The impact of tax policies that affect the compliance of SMEs

Abstract

The contrast of Zimbabwe's advanced industrial economy with its quickly expanding, poorly regulated informal sector results in significant economic issues. Due to an increase in non-compliance by potential payers of taxes, particularly SMEs, the subject of tax compliance has drawn greater attention from researchers in recent years. This has an adverse impact on the government's ability to raise the funds that are required to pay for social services. Even countries with the most effective tax systems and rapid economic growth have proved unable to raise the required funds. There aren't too many studies that expressly address the subject of small-company taxpayers' opinions regarding paying their taxes on time, despite the fact that prior research has provided some insight. Small business taxpayers throughout Zimbabwe have been the subject of studies on compliance, costs associated with electronic tax filing, and compliance attitudes. Researchers on how Zimbabwean small business taxpayers present themselves to tax authorities in accordance with national tax legislation are very few. This investigation focused on how tax regulations are followed by employees and owners of small businesses. There is a dearth of scholarship on tax compliance in developing countries, thus this study aims to fill that gap. The study's goals included looking into Zimbabwe's tax rules and how they affect SMEs as well as identifying any problems SMEs have with following tax laws. A descriptive approach was taken in conducting the survey. Out of 150 manufacturing companies in the Harare Msasa industrial district, Five enterprises were interviewed and given questionnaires in order to meet the study's objectives. These producers were divided into five categories: bakeries, plastic manufacturers, building material manufacturers, carpenters, and shoe manufacturers. One business from every single manufacturing category made up the sample. Tables and graphs were used to analyse and show the data. Revenue audits and the presumed tax system proved to be the main tactics used. It shows that the way the tax system is set up and how tax money is spent has a higher impact on tax compliance. Amnesty for taxes has the added advantage of making it easier for people who have fallen behind on their payments to catch up. The findings showed that ZIMRA conducts few audits of taxes since it depends mostly on self-assessments. The study also found a strong correlation between the tactics employed to harm SMEs and their tax compliance. Given the aforementioned information, it has been advised that tax government identify the cause of noncompliance before putting a fix in place. Prior to fully implementing the strategy, tax authorities should consider how it can affect tax compliance. The policy was created to widen the base of revenue. Tax education, tax holidays, and tax incentives should all be used to encourage voluntary tax compliance.

Date

2023

Publisher

BUSE

Keywords

Tax policies

SMEs

Supervisor

Mr. Chiriseri