THE INFLUENCE OF TAX RATE AND INCOME LEVEL ON TAX NON-COMPLIANCE IN TANZANIA
Authors:
Christina Kihanga
Abstract:
Tax compliance is a major problem for many tax authorities around the world and Governments continuously attempt to improve the level of tax compliance especially those in countries which face a high level of tax non- compliance. Tanzania is one of these countries in which tax non-compliance has been reported to be at a high level during the last few decades. This paper empirically investigates the influence of tax rate and income level on individual taxpayer’s non- compliance behaviour in Tanzania. This study is underpinned by the social influence theory and further supported by the deterrence theory and cognitive learning theory. Data were collected through survey questionnaires and analysed using multiple regression analysis and other statistical techniques. Distributed questionnaires totalled 491 that yielded 384 usable questionnaires. The results reveal that there is a positive significant relationship between tax rate and tax non-compliance, whereas the relationship between income level and tax non-compliance is negatively significant. This study concludes with the theoretical implications and practical recommendations for the Tanzania Government in order to improve tax collection such as to develop and implement more stringent enforcement strategies to improve the tax system in terms of penalty rate and tax rates. In addition, the Tanzania Tax Authority should play a more proactive role to encourage and educate individual taxpayers by enhancing their knowledge of taxation.