Academy of Accounting and Financial Studies Journal (Print ISSN: 1096-3685; Online ISSN: 1528-2635)

Abstract

Evaluating the Impact of Tax Knowledge on Tax Compliance Among Small Medium Enterprises in a Developing Country

Author(s): Wadesango Newman, Mwandambira Nokhu

Tax non-compliance is an area of concern for all government and tax authorities and it will continue to be an important issue that must be addressed. From a tax administration point of view, the rapid development of SMEs in the economy signifies a rapid increase in the number of ‘hard to tax’ tax payers. The purpose of this study was to evaluate if lack of tax knowledge contributed to high levels of tax non-compliance amongst SMEs in Zimbabwe. To achieve this, a quantitative research approach was used involving a sample of 35 SMEs and 40 tax officials. The findings were that SMEs in Zimbabwe possess basic tax knowledge about taxation but lack a deeper understanding like the difference between presumptive taxation and income based taxation. However, this insignificantly influences their non-compliance behaviour. It emerged that in order for tax knowledge to influence tax compliance positively, the tax rates and corruption need to be addressed too. In spite of these results, ZIMRA should still continue to raise awareness to uninformed and inexperienced SMEs on the benefits of paying tax, encourage proper record keeping through tax payer education and social media campaigns.