MBEYA UNIVERSITY OF SCIENCE AND TECHNOLOGY

COLLEGE OF HUMATIES AND BUSINESS STUDIES

Module: Research Methodology

Individual Assignment

OCTAVIUS MUYUNGI

19100633060159

CA/BBA-AF/20/9782
 TAXATION ESCAPISM OF SMALL AND MEDIUM BUSINESSES ENTITIES

( THE CASE STUDY IN MBEYA CITY )

INTRODUCTION AND BACKGROUND

This part present the background of the study and statement of the problem as the key basis of the

study in Mbeya City.

BACKGROUND OF THE STUDY

Taxation in Tanzania started from colonial era, it is a very important source of government revenue,

hence it enables the government to finance its functions including administrative, social, protective,

and development functions. Despite the fact that, tax is compulsory payment that enables the

government to finance its various activities, many business owners still do not like paying tax.

Therefore, this study assessed the effect of the tax payment on the performance of the small and

medium business in Mbeya City.

The tax regime in Tanzania consists of a number of direct and indirect taxes, value Added Tax, import

duty, excise duty and stamp duty, there are also taxes levied at the local government level and all the

central government taxes are administered by the Tanzania Revenue Authority (TRA).

The small and medium enterprises do pay tax after the monthly and annually revenue assessment from

their trade accounts, in case of the small business such as retailer shops, street vendors do pay tax after

approximation amount from Tanzania Revenue Authority (TRA).

Small and medium enterprise; these are the businesses that maintain revenues, assets or a number of

employees below a certain threshold. Each country has its own terms and conditions that allow certain

business constitutes small and medium sized enterprises features.

In Tanzania the income tax system to the individuals categorizes into two such as the small individual

traders who are not required to prepare the audited accounts and the medium individual who are

required to prepare the audited accounts. The small individual enterprises are taxed by presumptive tax

system while for the medium enterprises are taxed based on the annual profit determined from the

audited accounts.

Presumptive tax system; this is a tax system where individuals are taxed based on their annual

turnover. The tax does not require the audited accounts but the trader may opt and may prepare the

audited accounts and pay tax on the profit tax based with all required conditions such as tax payer

must be a resident, the annual turnover of the business do not exceed TZ100 millions , s/he have no

any part of the employment or investment activities and conduct business only for the year of the

income.

However; tax payment system in Tanzania have seen to be more complicated to the small and medium

enterprises owners due to various factors that undermine the sustainability of the small and medium

businesses. This include tax rates which are not healthier for the sustainability of the business in the

country’s economy.
STATEMENT OF THE PLOBLEM

The study findings revealed that most of urban small and medium businesses in Mbeya City have

been failed to exist in business due to unconducive tax rates provided by the Authorities which are not

proportional with the income of the trade transactions. The effectiveness in Tax Payment by urban

small and medium business proper maintenance of transaction records, the study findings revealed

that most of urban small and medium businesses in Mbeya City were not maintaining proper

transaction records as respondents supported by 98 ( 44%) respondents ,further analysis showed that

23 (10%) of the respondents strongly agreed with this, and 80 (38%) of the respondents were neutral.

This indicates that a large number of urban small and medium businesses do not maintain proper

transaction records, the results of the findings correlate with study done by Thuronyi (1996) which

shows that most of small businesses do not maintain proper accounting; therefore normally taxes

approximation depend on the interest of the Tanzania Revenue Authority Officers which normally

become tax burden to the owner of the small businesses.

RESEARCH OBJECTIVES

General Objective

The general objective of the study is to analyze all effects of the tax burden on the growth of the

small and medium businesses in Mbeya City and the possible measures that can be used to eradicate

tax burden payments in small and medium businesses.

Specific Objectives

The study intend s to cover the following specific objectives

 I. To examine the tax rates system in approximation of the small and medium businesses tax

payments.

II. To investigate the extent of the personal interest in tax presumptive payment system from

Tanzania Revenue Authority (TRA) Officers.

III. To assess the influence of the Tanzania Revenue Authority (TRA) on the performance of the

small and medium businesses in Mbeya City.

IV. To identify all the tax burdens that the small businesses encounter on their trade operations.

V. To determine the possible measures that can mitigate or eliminate completely tax burdens on

small and medium businesses.

SIGNIFICANCE OF THE STUDY

The study focused on the assessing all the tax burdens that the small and medium businesses do face

which contribute their income unfairly, and then the findings will help and develop further measures

on fair tax payment without any doubt from any part.

The study also aims at improving the effective performance of the small and medium businesses by

providing the relevant knowledge on tax payment systems and Income Tax Act provision.
REFFERENCES

KIYOSAKI, Robert T. ( 2012). Rich Dad’s CASHFLOW Quadrant. Guide to Financial Freedom,

Scottsdale: Plata Publishing, LLC

TRACY, Brian, (2016). 7 Point Formula for Financial Freedom: Personal Financial Tips to Help You

Make More Money.Retrieved from www.briantracy.com/blog/financialsucess/ 7point-

formula-for financial –freedom-personal-finance-make-more-money