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DETERMINANTS OF TAX COMPLIANCE BY SMALL AND MEDIUM ENTERPRISES IN ZIMBABWE.
ABSTRACT
This research investigated the determinants of tax compliance in small and medium compliance behaviour of SMEs in Zimbabwe for the tax period 2009 to 2011. The main enterprises (SMEs), focusing on how tax knowledge and compliance costs affected tax objectives of the study were to investigate how the unique business conditions of SMEs, the perceptions of SME operators towards taxation, levels of tax knowledge and compliance costs affect tax compliance of SME taxpayers. To achieve these objectives, research propositions were stated which mainly stipulated that the current tax system in Zimbabwe does not cater for the special business needs of SMEs and that strong correlations do exist among tax knowledge, compliance costs and tax compliance. The study adopted a chiefly qualitative research design. Methodological triangulation was employed, utilizing the interview method and a questionnaire survey to collect primary data from SMEs in Harare, Chitungwiza and Bindura. Interview responses were analyzed through summative content analysis and questionnaire responses were analyzed using SPSS software (V. 16.0). The results indicated that SMEs face different business conditions from large companies which cause them to bear high tax compliance burdens. The results also indicated that the perceptions of SME operators about tax fairness, tax service quality and government spending priorities greatly affect their tax compliance decisions. Tax knowledge was discovered to have no correlation with tax registration compliance but weak negative correlations with filing compliance. Compliance costs were discovered to have negative correlations with tax compliance. The study then recommended that the current tax law should be amended to incorporate provisions that grant special tax incentives to SMEs in order to improve voluntary tax compliance by SME taxpayers. The study also recommended that the Zimbabwe Revenue Authority (ZIMRA) should disseminate information on tax updates more frequently in order to improve the levels of tax knowledge for voluntary tax compliance.
KEYWORD
Small and medium enterprise, compliance costs, tax compliance, tax education, tax knowledge .