An Analysis of SMEs’ Attitudes and Practices Toward Tax Compliance in Zimbabwe

Abstract

The informal sector has become the major employer in Zimbabwe, but the sector is not contributing meaningfully to the treasury due to noncompliance on tax remittances by the operators. The research was done on 50 businesses in the retail sector in Gweru. The findings are that minimal efforts are being put in place to enforce compliance, and corruption levels are high among the tax collection officials. Small and medium enterprises (SMEs) evade compliance by paying bribes, keeping two sets of records, relocating to new premises without notifying authorities, and temporarily closing businesses during compliance blitz. Penalties have been found to be the most effective in enforcing compliance. Publicity should be increased by authorities using radio, television, and pamphlets, which were found to be most effective. In addition, the Zimbabwe Revenue Authority (ZIMRA) should give business people more formal tax education to enhance understanding of tax obligations and compliance.

SMEs' View on the Theory of Planned Behaviour and Penalty Magnitude: Preliminary Findings from Nigeria

“…Penalty in compliance is the process of increasing power of the authorities to ensure enforced compliance (Kirchler, Hoelzl, & Wahl, 2008). Also, Nyamwanza, Mavhiki, Mapetere and Nyamwanza (2014) in their studies revealed that penalty is found to be the most effective variable in enforcing compliance. In addition, other studies conducted on enforce compliance, found that penalty has played a great role to deter, motivate and correct improper behaviour of SMEs (Poppelwell, Kelly, & Wang, 2012;Wenzel, 2001).…”

“…In addition, penalties have been found to be the most effective tools in Zimbabwe. As most SMEs evade remitting tax collections by bribing the tax collection officers through keeping two set of records and sometimes relocating to new sites without notifying the tax officials (Nyamwanza et al, 2014). However, Swistak (2016) posits that penalties have the potential to work effective if used as an auxiliary means of delivery and implementing a sound compliance strategy.…”

“…In relating attitude of SMEs to VAT compliance, some studies posit positive relationship between attitudes and tax (VAT inclusive) compliance (Benk et al, 2011;Nkwe, 2013), while other studies found that the AVC depends on how the SME or taxpayer is treated by the government. That is, the SMEs expect the government to provide its citizens with the basic needs, so as the value of the tax they are paying/remitting will be felt (Nyamwanza et al, 2014;Oladipupo & Izedonmi, 2013). The second construct that predicts intention in TPB is the subjective norms.…”

“…For instance, the items for VAT compliance intention (VCI) were five, using a hypothetical VAT scenario as adapted from Efebera et al (2004) and Langham et al (2012). The items for penalty magnitude were five as adapted from Efebera et al (2004) and Nyamwanza et al (2014). In the same vein, the study used five items each for attitude towards VAT compliance, subjective norms and perceived behavioural control as adapted from Saad (2011).…”

A Review of Critical Success Factors Which Drives the Performance of Micro, Small and Medium Enterprises

“…Examples of regulatory authorities are government departments like tax authorities, standards setting, and monitoring boards, environment monitoring boards and local authorities. A considerable number of MSMEs in Zimbabwe face closure every year when the Zimbabwe Revenue Authority fines them heavily for failing to comply with various tax laws of the country (Utaumire, Mashiri & Mazhindu;Nyamwanza, Mavhiki, Mapetere, & Nyamwanza, 2014). Therefore compliance to the country's trade regulations could ensure that an enterprise avoids unnecessary penalties and operate profitably leading to its long term success.…”