Norest Ushe Final Project

RESEARCH PROJECT
FOR
NOREST USHE
IN PARTIAL FULFILLMENT OF REQUIREMENTS OF
ADVANCED CERTIFICATE IN CUSTOMS AND TAXATION
RESEARCH TOPIC:
AN EXPLORATION ON POLICIES THAT CAN BE EMPLOYED BY
ZIMRA TO INCREASE VOLUNTARY COMPLIANCE TO TAX
SYSTEMS.
NOREST USHE
APPROVAL FORM
The undersigned certifies that he/she has fully supervised and recommends to the ZIMRA
Training Centre for acceptance, a dissertation entitled:
…………………………………………………………………………………………………….,
Submitted by …………………………………….. in partial fulfilment of the ZIMRA Revenue
Traineeship Programme.
………………………………………………………..
Research Supervisor
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DECLARATION
I declare that this project is a result of work carried out by myself. Where the work of others has
been used, due credit has been given. Further, to the best of my knowledge, this paper has never
been presented to any other institution for an award of any degree or diploma.
______________________________
Norest Ushe (Researcher)
Witnessed by
____________________________
Irene Rwatida (Supervisor)
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ACKNOWLEDGEMENTS
Above all, I owe much tribute to the Almighty God who gave me a life worth living and I thank
Him for giving me the strength to accomplish this research project.
The success and accomplishment of this research work stems from efforts and dedication offered
by many individuals and institutions whose support was either direct or indirect. I thank all of
you for your devotion, generosity and mercy to complement my labours in making my
traineeship successful.
With much regard, I thank my wife, K. Mwarewangepo and my loving daughter, Adele, for their
endless love. I equally thank them as they were always by my side when things turned the other
way round. Thank you indeed for being there when I needed you. You have been special friends
to me.
I acknowledge the Zimbabwe Revenue Authority particularly the Training school department for
the quality training accorded to me for the past 1 year 8 months. The efforts of both academic
and non-academic staff in organisation and implementation of the training school agenda are
much appreciated. The skills attained will facilitate perfection in my professional career.
Special thanks go to Mr E. Mangwendeza, the Supervisor of this research work for his wise and
kind guidance. His genuine cooperation, encouragement and simplicity enabled me to
accomplish my work in a calm and convenient environment. I wish to thank him sincerely for his
precious availability. His assistance and his advices have been particularly helpful. His devotion
and commitment towards the success of this work will always be valued.
Particular thanks also go to my colleagues and friends in Zimbabwe Revenue Authority for being
so friendly and supportive
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ABSTRACT
The researcher seeks to highlight and clarify on ‘how best the Authority can improve on
voluntary client compliance?’ Although the organization is moving towards a client focused
approach, the researcher herein intends to identify the best ways of improving voluntary client
compliance to achieve the desired revenue targets without dunning or prosecutions being
adopted. Clients have developed a tendency of negative perception about ZIMRA and the entire
system of paying taxes, this dates back to the bible times when tax collectors were enemies of
the society because people did not want to pay taxes and the collectors were viewed as corrupt
and greed.
Definition of Voluntary client compliance "A system of compliance that relies on individual
citizens and organisations to report their income, calculate their tax liability correctly, and file a
tax return on time honestly and voluntarily without cohesion.” The income tax system is
voluntary and mostly depends on information declared by a client therefore permitting clients to
arrange their financial affairs in such a way as to take advantage of any tax benefits and some tax
avoidance techniques. Voluntary does not give immunity to some clients; instead to the client it
means you can minimize your taxes by taking advantage of various deductions, provisions of the
law and tax credits which is a hindrance on the part of ZIMRA on the objective of revenue
collection. Voluntary also means that you must tell the Authority what your tax liability is and
the only way to do that is to file a tax return without the pressure of fulfilling requirements of
obtaining a tax clearance (ITF 263).
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LIST OF FIGURES
Figure 1………………………………………………………………………………... 30
Figure 2………………………………………………………………………………... 32
Figure 3………………………………………………………………………………... 33
Figure 4………………………………………………………………………………... 34
Figure 5………………………………………………………………………………... 35
Figure 6………………………………………………………………………………… 36
LIST OF TABLES
Table 1………………………………………………………………………………... 26
Table 2………………………………………………………………………………... 27
Table 3………………………………………………………………………………... 28
Table 4………………………………………………………………………………... 29
Table 5…………………………………………………………………………………. 31
Table 6…………………………………………………………………………………. 32
Table 7………………………………………………………………………………….. 37
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LIST OF ACRONYMS
BDT Bulawayo Domestic Taxes
CGT Capital Gains Tax
EU European Union
IR Inland Revenue
OECD Organisation for Economic Co-operation and Development
PAYE Pay As You Earn
RRA Rwandan Revenue Authority
SAP Systems Application Program
SARS South African Revenue Service
UK United Kingdom
VAT Value Added Tax
VDP Voluntary Disclosure Program
ZIMRA Zimbabwe Revenue Authority
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TABLE OF CONTENTS
APPROVAL FORM..................................................................................................................................i
DECLARATION......................................................................................................................................ii
ACKNOWLEDGEMENTS....................................................................................................................iii
ABSTRACT.............................................................................................................................................iv
LIST OF FIGURES..................................................................................................................................v
LIST OF TABLES....................................................................................................................................v
LIST OF ACRONYMS...........................................................................................................................vi
CHAPTER 1........................................................................................................................................3
1.1 INTRODUCTION....................................................................................................................3
1.2 BACKGROUND OF THE STUDY.............................................................................................3
1.3 PROBLEM STATEMENT...........................................................................................................5
1.4 RESEARCH OBJECTIVES.........................................................................................................6
1.5 HYPOTHESIS...........................................................................................................................6
1.6 RATIONALE OF THE STUDY..................................................................................................7
1.7 RESEARCH QUESTIONS...........................................................................................................7
1.8 LIMITATIONS..............................................................................................................................7
1.9 DELIMITATIONS.........................................................................................................................8
1.10 RESEARCH METHODOLOGY...............................................................................................8
1.11 CONCLUSION..........................................................................................................................10
CHAPTER 2......................................................................................................................................11
2.1 INTRODUCTION..................................................................................................................11
2.2 DEFINITIONS........................................................................................................................11
2.3 CAUSES OF NON-COMPLIANCE....................................................................................12
2.4 IMPACTS/ CONSEQUENCES OF NON-COMPLIANCE...................................................15
2.5 AN ANALYSIS OF NON- COMPLIANCE CONTROL MECHANISMS....................16
2.6 CONCLUSION.............................................................................................................................19
CHAPTER 3......................................................................................................................................20
3.1 INTRODUCTION........................................................................................................................20
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3.2 RESEARCH DESIGN.................................................................................................................20

3.3 SAMPLE DESIGN......................................................................................................................21
3.4 DATA COLLECTION METHODS..........................................................................................22
3.5 SECONDARY DATA COLLECTION.....................................................................................23
3.6 LIMITATIONS OF THE RESEARCH METHODOLOGY...................................................24
3.7 CONCLUSION.............................................................................................................................24
CHAPTER 4......................................................................................................................................26
4.1 INTRODUCTION........................................................................................................................26
4.2 DESK RESEARCH– Internet Research on Rwanda Revenue Authority..............................26
4.3 INTERVIEW SCHEDULE.........................................................................................................27
4.4 OBSERVATIONS........................................................................................................................29
4.5 QUESTIONAIRE RESPONSES................................................................................................29
4.6 CONCLUSION.............................................................................................................................37
CHAPTER 5......................................................................................................................................39
5.1 CONCLUSION.......................................................................................................................39
5.2 RECOMMENDATIONS.......................................................................................................40
REFERENCES AND BIBLIOGRAPHY............................................................................48
APPENDICES...................................................................................................................................49
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CHAPTER 1
INTRODUCTION AND BACKGROUND
1.1 INTRODUCTION
The increasing concern of tax administrations throughout the world is on how to simplify the tax
assessment system to encourage voluntary compliance and many countries have embraced the
self-assessment system as a solution. The recent trend in developing countries sees a change
from the official assessment system to a self-assessment system to improve voluntary
compliance. This report deliberates the unavoidable issue of voluntary tax compliance as a major
concern of many developing countries using Zimbabwe as an example.Voluntary compliance is a
classification of obedience that count on individual citizens to report their income freely and
willingly, calculate their tax obligations properly, and file a tax return on time. The Zimbabwean
income tax system is voluntary as people are permitted to arrange their financial affairs in such a
way to benefit from any tax benefits. Voluntary does not give immunity citizens as tax laws do
apply but people are allowed to minimise their tax obligations by taking advantage of various
deductions, provisions of the law and tax credits. Voluntary compliance also permits taxpayers to
tell the Zimbabwe Revenue Authority their tax liability by submitting tax returns. The researcher
pursues to highlight and simplify on the policies that can be implemented by the Zimbabwe
Revenue Authority to improve voluntary compliance by clients.
1.2 BACKGROUND OF THE STUDY
Zimbabwe Revenue Authority (ZIMRA) was formed in September 2001 as a fusion of the two
revenue collection Departments i.e. Department of Taxes and Department of Customs and
Excise. The leading reason for the formation of ZIMRA was to advance the proficiency of the
Revenue collections and sustenance of the economic development programs.
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In Zimbabwe, the tax system was in full swing since the initial days of colonial settlement.
Today, the government accumulates over USD 3.8 billion in taxes and duties. A good tax system
needs to be healthy and efficient in terms of revenue collection, compliance enhancement and
control of tax offences. However with the evolution and growing globalisation of businesses
(including the increased mobility of capital and rise of e-commerce), the chances for taxpayers to
violate tax laws are expanding, prompting the need for the tax administration to continually
update and broaden the strategies it uses to deal with this problem and increase voluntary
compliance.
In recent years, major reforms in tax administrations have been done as governments attempt to
improve the efficiency and effectiveness of their revenue collection operations. Central to these
changes has been the creation of sound corporate governance practices, including the application
of modern risk and compliance management approaches. As a result, national revenue authorities
in a number of countries have given substantial consideration to the growth of sound compliance
management practices, including Zimbabwe. This has resulted in ZIMRA providing more
comprehensive guidance on compliance management practices, mostly for small/medium
enterprises (SMEs). Revenue collection using audits, fines and other punishment based methods
has proven difficult due to firms’ ability to evade payment, and the difficulties of enforcing legal
sanctions.
This research paper conveys a critical examination of both statutory and administrative
mechanisms that can be used by ZIMRA to increase voluntary compliance clients and reduce tax
offences. A comprehensive study has been carried out to identify best practices that are
employed by other tax administrations in detection and prevention of violation of tax laws and
improve voluntary compliance. In order to achieve voluntary compliance by clients, ZIMRA
formulated a client charter that outlined the expectations of its clients’ as well as outlining the
clients’ statutory obligations. Good compliance standards and tax practices enhance proper
planning and economic development through efficient revenue generation. Lately compliance
with tax laws has been a public subject of political debate, principally because these taxes affect
the majority of citizens in a society. It has created a lot of curiosity and the zeal to investigate on
factors that affect voluntary compliance by taxpayers. This would assist to reshape the economy
through the tax system and enhance taxpayer compliance.
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The resolution of this report is to collect and share knowledge on how to improve voluntary
compliance by taxpayers. The result should be concrete and enable ZIMRA in particular to
flexible when it comes to matters of client’s voluntary compliant. The impression is to deliver
knowledge that can be used practically not to recommend how things should be done. The report
should be deliberated as an outline to the subject for a healthier understanding of the approaches
revenue bodies can effectively identify and implement to increase compliance.
To end with, the report deliberates the effectiveness and suitability of measures applied to
improve voluntary compliance and control tax offences and attempts to offer some
recommendations towards the compliance control mechanisms under Zimbabwean Tax system.
1.3 PROBLEM STATEMENT
According to Richard M., Administrative dimensions of Tax Reform, 2003, p.24, people talk
about tax issues, criticise about them and try to escape them whenever they can get an
opportunity. Some constantly pay; some constantly cheat; and some cheat when they think they
can get away with it. Businesses also respond to taxes, both in how they consolidate their
activities and, perhaps, in where they carry them out.
Taxpayers reveal unpredictable levels of tax compliance. As a way to curb noncompliance,

ZIMRA has put in place measures that one would indisputably be induced that noncompliance
by the taxpayers will never be a subject for discussion. Nevertheless, the levels of
noncompliance in Zimbabwe are evidently still very high The explanations is that while all these
measures are being put in place, to boost voluntary compliance, the organization has overlooked
the subject that matters most, the matter of high rates of taxes and tariffs. This is supplementary
affected by the low performances of Zimbabwe economy.
This research was intended to find the potential solutions for the following questions:
1. How effective is Zimbabwe Taxation Law in increasing voluntary compliance?
2. What strategies can be put in place by ZIMRA in order to effectively address the problem
of noncompliance?
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1.4 RESEARCH OBJECTIVES

1.4.1 General objective
The general objective of this study was to assess mechanisms that can be used to improve
voluntary compliance by taxpayers in Zimbabwe. The research recommended and drew
conclusion on legal regime surrounding non-compliance and violation of tax laws and proposed
policies to address these violations.
1.4.2 Specific objectives
The research study highly concentrated on specific objectives predominantly which are to:
1. Ascertain legal and organisational measures used by ZIMRA to address noncompliance

2. Identify the existing legal and administrative weaknesses in addressing non compliance
3. To identify the causes of tax non-compliance by taxpayers/clients
4. To find ways of increasing front-line enforcement resources to support voluntary client
compliance
5. Assess the clients’ perceptions on the role of ZIMRA in managing compliance.
6. To determine if there is any relationship between the measures being put in place by ZIMRA
to inspire compliance and the compliance itself
7. Recommend mechanisms that should be used by ZIMRA to improve voluntary compliance.
1.5 HYPOTHESIS
Notwithstanding the point that there are various legal provisions and administrative mechanism
put in place to control non-compliance, the effectiveness of these mechanisms remains debatable.
Based on this problem, we have been encouraged to carry out a critical analysis of efficiency of
noncompliance control mechanisms in ZIMRA. This investigation work will be created on the
following hypotheses:
1. Some weaknesses occurred in both statutory and administrative mechanisms and led to
failure of tax compliance control;
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2. Enhancement of statutory and administrative mechanisms such as tax payer education

and assistance may lead to an increase in voluntary compliance.
1.6 RATIONALE OF THE STUDY
ZIMRA will benefit from this research study as it goes a long way in finding means on how to
increase the collection of various taxes and enforcing voluntary compliance as we are operating
in a globalised industry. This study also disclosed clients’ opinions on ZIMRA in as far as
revenue collection is concerned and thus make significant recommendations. This report will
also benefit the state as it will assist to boost revenue collection for the nation that will help in
economic development, and improve the life of the ordinary Zimbabweans.
1.7 RESEARCH QUESTIONS
1. Is ZIMRA at presently employing effective compliance management principles?

2. What are causes of non-compliance?
3. What have been the effects of non-compliance to government coffers and the economy?
4. What has the organisation done to educate its clients on compliance needs?
5. How can ZIMRA enforce voluntary compliance and what remedies are at their disposal?
1.8 LIMITATIONS
The researcher is an employee of ZIMRA who is required to be at work all the time. As a result
of this fact, there was a restraint of time to sufficiently cover the demography. The researcher
applied for some leave days to conduct the research. There was also time and transport
constraints associated with conducting face-to-face interviews hence the researcher focused on a
sample of clients coming to the office for other issues.
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1.9 DELIMITATIONS
The study was limited to ZIMRA region 2 Domestic Taxes in Bulawayo. This is so because all
the forms of Revenue heads administered under Domestic Taxes were covered. The Station also
interacts with other stations like Victoria Falls and Beitbridge Domestic Taxes in the enactment
of Tax Laws. The researcher is convinced that results are a true reflection of ZIMRA generally
whose similar policies apply throughout the country. The information and data used is based on
the one gathered during the researcher’s training term at ZIMRA Mhlahlandlela station from
November 2013 to September 2014.
1.10 RESEARCH METHODOLOGY
Research methodology is the part of a research work in which the techniques and methods to be
used in conducting a research are described. Research methodology includes both Research
Techniques and Research methods.
Qualitative and Quantitative Data was collected management, section supervisors and revenue
specialists at ZIMRA Mhlahlandlela Station, who relayed the methods that have been put in
place to safeguard compliance by tax payers. Secondary data was collected from clients who
also related on the challenges that they face in complying with the statutory requirements. The
clients also related their perception of ZIMRA in relation to their reasons for non-compliance.
1.10.1 Scope of the Research
The case study was confined to ZIMRA Bulawayo Domestic Taxes. This is because the station
manages all the Inland Revenue heads like VAT, PAYE, Income taxes, Presumptive taxes and
CGT
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1.10.2 Target Population
Section Managers and Supervisors for inland revenues will be interviewed on client compliance
and policies in place to improve voluntary compliance. Employees from ZIMRA Mhlahlandlela
station will also be interviewed one on one and through questionnaires to give their account on
client compliance from their day to day experiences. Clients and clients’ representatives mostly
Tax Consultants will also be interviewed to give their explanations on the subject.
1.10.3 Sample size
Three Section Manager will be interviewed on the measures the station had put in place to
encourage voluntary compliance.
Five Section Supervisors –will be interviewed on the measures and practices in place to manage
risk and compliance and the challenges they face in their endeavours.
Fifteen employees- will be interviewed to contribute on their daily experiences on client
compliance.
Six Tax Consultants that represent diverse companies will be interviewed to give clients’
perceptions on voluntary compliance.
Fifty clients - 30 from informal traders that include taxi-cabs operators, hair saloons operators,
flea-markets and 20 from established formal businesses will be interviewed.
1.10.4 Techniques to be used:
a) Documentation
This involved examination of secondary data by referring to textbooks on taxation, Taxation

Law, tax administration, Zimbabwean Statutory instruments, and statutory instruments of other
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countries, website of ZIMRA, and papers presented in local and international seminars,
conferences and workshops.
b) Interviews
In order to obtain data related to the objectives of this research, selected taxpayers and ZIMRA
Staff working at Mhlahlandlela Domestic taxes will be interviewed to comprehend the practical
approach to noncompliance control processes and procedures.
1.10.5 Sampling Methods
Target sample was applied to Section Managers and Supervisors.

Simple random sampling will be applied on the employees and tax consultants that deal with
ZIMRA on behalf of their clients.
Convenience sampling will be applied for clients that visit ZIMRA Mhlahlandlela Station.
1.10.6 Data Collection Instruments
One on one interview was conducted with the Section Managers. A semi structured questionnaire
with different questions was directed to employees, clients and Tax Consultants.
1.11 CONCLUSION
This research discovered the many existing issues associated with noncompliance in Zimbabwe.
It would be natural to ask whether any conclusive resolutions can be projected in order to create
a more operative and impartial system of improving voluntary compliance. Lack of compliance
by clients has brought about delays in system updates, minimal revenue collections and serious
database deficiency to the authority. On the other hand lack of staff compliment at stations has
impacted on the frequency of audit follow-ups on clients resulting in non-compliance. Thus the
research’s aim is to try and come up with best policies and mechanisms which the authority can
adopt to enhance revenue collection. The research was limited by several factors like time and
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abundance of clients but nonetheless it is hoped that it will still prove useful for its intended
purpose.
CHAPTER 2
LITERATURE REVIEW
2.1 INTRODUCTION
This chapter will be devoted to the theoretical aspect and general overview of compliance in
order to facilitate knowledge of the problem related to voluntary compliance in the context of the
Zimbabwean tax system. It also contributes to illustrate that the researcher did not start the
project as an absolutely uninformed trainee and is a total acknowledgement that the exploration
is not the first of its kind but rather make an examination on what other writers and researchers
give about the problem of voluntary compliance. The chapter will mainly focus on definition of
tax and related terms, definition of voluntary compliance and related terms, causes of non-
compliance and the negative impacts or consequences non-compliance and an analysis of
controls for non-compliance that can be used to improve compliance. The researcher is going to
use information mostly obtained from the internet especially the Rwandan Revenue Authority
(RRA) website.
While all the evidence presented in this chapter is neither decisive nor exhaustive, the researcher
however is of the belief that the theoretic framework covered signifies a fair if not true
illustration of reality of the subject of voluntary compliance in a country
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2.2 DEFINITIONS
2.2.1 Tax
The Oxford Dictionary defines a ‘tax’ as a “contribution levied on persons, property or business
for support of government”, while OECD defines a tax as “a compulsory, unrequited, transfer by
the general government sector.” It is in effect a contribution designed to reduce private
expenditure in favor of public expenditure to enable the government to obtain funds in order to
provide social and worth goods and services, reallocate income, clear market inadequacies and
stabilise the economy.
2.2.2 Voluntary Compliance
A system of compliance that depend on individuals to report their income freely and voluntarily,
calculate their tax liability correctly, and file a tax return on time. In Zimbabwe, the income tax
system is voluntary since taxpayers are free to arrange their financial affairs in a way to take
advantage of any tax benefits. Voluntary does not mean that the tax laws don't apply allows
taxpayers to take advantage of various deductions, provisions of the law and tax credits.
Voluntary also means that a taxpayer must tell the tax administrator what his/her tax liability is
and the only way to do that is to submit a tax return.
2.3 CAUSES OF NON-COMPLIANCE
There are many causes of non-compliance to the extent that one cannot mention them all. It
would, therefore, be difficult to establish the causes which are more significant than others. The
researcher however, cite some of the causes of non-compliance which include high rates of taxes,
limited resources and capacity of tax administration, failure to publish tax offenders, perceptions
towards taxation and historical factors, corruption among some tax officials, low literacy and
lack of tax education, technological developments, and unemployment, poverty and nature of
production.
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2.3.1 Complexity of tax laws systems and procedures
According to Martin D. (2005) “Tax Simplification”, it is well known that tax laws are often
complex, confusing, and arbitrary. This complication offers sufficient justification for the
ordinary people to avoid it. A highly complex tax system also makes the taxpayer compliance
burden and costs high, so taxpayers have less incentive to comply with the laws. For example,
there is a high cost of compliance due to the different kinds of forms to fill and uncoordinated
due dates. If taxpayers do not understand how their taxes are calculated and when these should
be paid, they will not be comfortable in paying them
2.3.2 High rates of taxes
Apparently high tax rates are forcing some individuals to infringe their tax obligations.
Therefore, it would be counter-productive and the people complain that VAT rate of 15 percent
is very high and it has induced people to desist from voluntary compliance and has diverted trade
from official routes to non- official routes.
2.3.3 Limited resources and capacity of tax administration
Allan C, The Theory of Taxation, Penguin, (1971) p.24 states that the limited resources and
capacity of tax administration is a reality and often means that non-compliance remains
unrestrained. Limited resources and capacity take the form of scarce numbers of staff with the
required skills and knowledge (e.g. audit and investigation skills); poor infrastructure or systems.
With the tax administration incapable to sufficiently carry out its role of enforcement and
education/assistance effectively and efficiently, this often translates into taxpayer insights that
there is a low risk of getting caught and/or there are minimal consequences of non-compliant
behaviour.
2.3.4 Views towards taxation and historical factors
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RRA Anti-smuggling Strategy, July 2009, p.5 stated that amongst some taxpayers, tax principles
are low and there is a strong culture of failing to comply with tax laws. In other words, there is
no social condemnation or reprimand for non- compliance to tax. Often, this is intensified by the
oblique actions of friends, relatives, co-workers and business colleagues In Zimbabwe, persons
committing breaches of tax laws have not been described as criminals. Some taxpayers do not
also realise what the government is doing for them as a result of tax revenues and it is from here
that the taxpayers escape from paying taxes in conformity to what they are due to pay.
2.3.5 Corruption among some tax officials
Corruption inclination among tax officials has a very ancient history, For example, the Bible
refers to a tax collector called Zacchaeus who was corrupt (but happily reformed). Corruption is
present when public officials abuse their positions of public authority for private gain.
Corruption damages confidence in the tax system, undesirably affects willingness to pay taxes,
and reduces a country’s capacity to finance government expenditures. There is considerable
potential for corrupt practices in revenue administration involving tax officers, taxpayers,
importers and customs clearing agents.
2.3.6 Low literacy and lack of tax education
In Zimbabwe, the rate of tax literacy is rather low and there is limited tax education. For a person
with limited tax knowledge it is difficult to understand the need for payment of taxes hence taxes
are often treated as punishment. Some unscrupulous taxpayers exploit the general low literacy
with perceptions by not maintaining any business records or accounts when in reality many of
them are fully capable or literate enough to do so. The tax administration needs to think of other
methods to disseminate information such as running face-to-face seminars and workshops.
2.3.7 Technological progresses
The rise of e-commerce and internet communication is changing the nature of business and
makes it even harder for tax administrations to track and account for transactions. The deletion,
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hiding or encryption of electronic records by businesses also makes it difficult for tax
administrators to uncover and follow the audit trail.
2.3.8 Poverty and nature of production
The bottom-line is that taxpayers are struggling to stay alive hence paying their taxes is the last
thing on their mind. They do not see taxes as an investment that might improve their future living
standards. Traders are also involved in non-compliance due to failures of their business
2.4 IMPACTS/ CONSEQUENCES OF NON-COMPLIANCE
2.4.1 Consequences on the government
According to Smith K, (1987) Understanding taxpayer Behaviour, page 639; non-compliance

deprives government of revenue for public expenditure and increase costs of preventing,
detecting and convicting tax offenders which is a burden to the government. More revenue is
spent on the enforcement side including investigation, prosecution and punishment of non-
compliant clients which would otherwise be spent on developmental projects such as
infrastructure development, health care and education.
2.4.2 Consequences on the tax offender
On the tax offender point of view, a tax is considered as an obligation and can have an impact on
the taxpayer who fails to execute his obligation if the taxpayer is proved guilty of non-
compliance hence heavy administrative penalties and interests are imposed on him and he can be
criminally prosecuted and imprisoned. Additional expenses are also incurred in form of bribing
tax officials, hiring people to prepare fictitious accounts and falsification of documents
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2.5 AN ANALYSIS OF NON- COMPLIANCE CONTROL

MECHANISMS
2.5.1 Control of corruption among tax officials
One of the flaws in the tax administration is continued tendencies of corruption in accordance
with RRA Customs & Excise action plan, 2007, p.2, corruption in revenue administration can
take many forms ranging from systematic, where individuals act together to systematically
support evasion, to individual corruption, where staff either have ‘clients’ whom they facilitate
illegally or where they simply exploit their positions for financial gain. The Zimra code of
conduct clearly states that a Zimra employee must be aware that it is a gross misconduct to
receive any gift, loan, fee, reward or advantage for doing an act of his official duty even valid but
not subject to the remuneration hefty punishment to officers involved in corruption and related
offences.
According to RRA Quality Assurance 2008 annual report, 49 investigations in connection with
corruption, tax evasion, unjustified increase in wealth, theft and other staff malpractices were
conducted. The concluded cases involved 60 employees suspected in which 16 were dismissed
for corruption, tax evasion and other staff malpractices, 12 were acquitted after being found not
guilty while 32 were given different administrative sanctions
As it can be concluded from above statistics the ‘the prevention is better than cure’ method is not
put in place rather than applying the sanctions when the case of corruption has already taken
place. Dismissals and other disciplinary actions can minimise corruption but they cannot
overwhelmingly eliminate corruption.
2.5.2 Registration and deregistration of tax payers
A tax administration cannot be effective in control of tax offences and non-compliance if there is
no quality taxpayer register in place. If there is no quality register, the actual number of the
taxpayers and their category is not known to the tax administration and it becomes difficult to
identify those who have failed to comply and take appropriate actions against them. Currently,
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taxpayer registration turn up in Zimbabwe is reducing yet the economy at large is deteriorating.
Registration procedures and rules have been in place but there is a need to activate, strengthen
and enforce them for efficiency and effectiveness. In order to enhance taxpayer’s compliance
with tax law and also determine the level of non-compliance, enforcement of registration and
deregistration procedures should be done.
However, in terms of taxpayer registration in Zimbabwe there is no adequate link with the public
agency that provides trade licenses to enforce taxpayer registration. If there is a connection
between these agencies and the tax administration, all business operators can be brought in the
tax net and the Zimra can enforce the law against those who have not voluntarily registered. In
Rwanda, some taxpayers do not notify the RRA of the change in their registration details ranging
from the change of phone number, to ceasing of businesses. In such a situation, it is challenging
for tax auditors to trace tax offenders in that category and conduct investigations on their
operations.
2.5.3 Obtaining information through audit and investigation
According to E. burnie and M. Michelman (2005), Compliance and Avoidance; the declaration
of tax is made when the declaration form with the supporting documents is submitted to the tax
administration. However this does not constitute the only sources of information for the tax
administration because the tax administration has powers to carry out investigations to get
additional information. This examination is conducted in case the tax administration is in doubt
of the information furnished by the taxpayer and suspects that a tax offence has been committed.
Zimra has the right to obtain information from other persons in case there is need to know the
structure and use of the property of the taxpayer. In the UK, rules were introduced in 2001
necessitating financial institutions to collect information about UK and foreign-source interest of
non-UK persons and to provide that information to the Inland Revenue with a view to the
information being exchanged with the appropriate overseas tax authorities. These rules were
introduced in response to the EU debate on the proposed savings directive and concerns about
tax evasion and non-compliance with the EU.
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The weak point under Zimbabwean tax system is that during audits and investigations,
prominence is put on the use of the information got from the taxpayer himself. Information from
third parties is rarely used. Third party information leads to increased tax recoveries and possible
discovery of new cases of tax violations and non-compliance. It also deters tax evasion if used
properly in the long term. When this is done, it is often possible to check the reliability of a tax
return.
2.5.4 Sanctions for non-compliance
According to a compliance report by Rwandan committee of experts on Tax compliance (1998),

the tax system can be expected to function smoothly and yield anticipated revenues only if
adequate penalties are imposed for violations that strike at the heart of the tax system and
penalties for non-compliance with tax obligation are an essential element of a robust tax system.
Probably the most old-fashioned mechanism used by tax administrations to deal with non-
compliant taxpayer behaviour is the application of fines or penalties. However, the Zimbabwean
Tax law sets out various offences and penalties which include, imprisonment of tax offenders,
application of monetary fines and closure of business activities by the Commissioner General
The Rwandan taxation law also provides for different sanction ranging from monetary sanctions,
imprisonment and publication of tax offenders. However, according to available statistics in
Zimbabwe, the sanction of imprisonment and publication of tax offenders is rarely applied.
2.5.5 Taxpayer education and assistance
Taxpayer education and assistance is an important administrative mechanism that is being used
by many revenue authorities in developing countries to enhance taxpayers’ compliance with their
tax obligations. According to RRA taxpayer service annual report 2008, a lot is being done by
Rwanda tax administration to educate and assist taxpayers but there are still some weaknesses,
for example, tax intermediaries are not effectively assisted and educated yet they play a vital role
in improving taxpayer compliance. In Zimbabwe, inadequate information and tools are being
provided to tax payers to assist them to become compliant with their tax obligations.
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2.5.6 Voluntary Disclosure Programme
As part of compliance approach, SARS has always approved the “proportional response model”
in response to taxpayer behaviour. The model states that response should be proportional to the
behaviour of the taxpayer. So where a taxpayer makes an authentic mistake they should be
provided with a chance to correct the mistake and be treated moderately. But where a taxpayer
intentionally and expressively evades tax and seeks to hide this from SARS for as long as
possible, they should face the full potency of the law. In line with this, SARS has traditionally
applied leniency to those taxpayers whose integrity got the better of them and who voluntarily
come forward to disclose previous non-compliance which SARS was not yet aware of or
investigating. This approach is now being formalised in a Voluntary Disclosure Programme
(VDP). Taxpayers may come forward during this period to disclose their defaults and regularise
their tax affairs. Successful applicants will have to pay the full amount of tax due but will not be
faced with additional tax, penalties and possible criminal prosecution. In addition, depending on
the circumstances of the case, they will not be charged either 100% or 50% of the interest that
would otherwise be due.
2.6 CONCLUSION
In conclusion, this chapter was dedicated to the hypothetical aspect, notions and general
overview of taxation and tax offences in order to simplify understanding of the problem related
to control of tax non-compliance in Zimbabwe using mainly the sources and concepts of
Rwandan tax system. The chapter mainly focused on definitions of tax and voluntary
compliance, main tax offences, causes of tax offences and the negative impacts or consequences
of tax offences.
After carrying out an analysis of mechanisms applied in the control of non-compliance, the
existing weaknesses in non-compliance control tools are identified which included limited
powers of access to information for tax audit and investigation, lack of effective punishment of
tax offenders, inefficient registration and de-registration procedures, limited taxpayers’ education
and assistance; and limited control of corruption among tax officials.
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CHAPTER 3
RESEARCH METHODOLOGY
3.1 INTRODUCTION
Research methodology is the part of a research work in which the practises and approaches to be
used in conducting a research are described in detail. . It expresses the study population of the
research, the sampling method and the data collection methods. The information was composed
using desk research and field research methods. However, there are various research designs
which could have been used in trying to find out the best way ZIMRA could improve voluntary
compliance amongst clients whether registered or not. This chapter explores the methodology
employed by the researcher. It further discuss the research approach, sample design, data
collection methods, data analysis and limitations of the selected methodology
3.2 RESEARCH DESIGN
According to Churchill (1999), a research design is the arrangement of conditions for collection
and analysis of data in a manner that aims to combine relevance to the research with economy in
procedure.The choice of research design relies upon how much is known about the problem. If
little is known about a subject, exploratory research will be appropriate. Exploratory research is
often used when the problem to be solved is difficult to define. The approach mainly centers on
reviewing published data, interviewing knowledgeable people, or investigating trade literature
that discusses similar cases. The key characteristic of exploratory research is its flexibility. The
researcher often adapted the research approach as the ill-defined problem evolves into one with
more precise meaning. Though exploratory studies may be undertaken in a number of different
ways experience has indicated that literature searches, experience surveys and analysis of
selected cases yield satisfactory results.
In this study, the exploratory research approach was found to be most appropriate to the research
question as the concept of voluntary compliance is yet to be fully explored in
Zimbabwe.
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3.3 SAMPLE DESIGN
Upon an investigator identifying the problem and developing the relevant research design and
data collection tools, the next step in the research process is to select those elements from which
the information will be collected. A way of collecting information could be to totally canvass
the population. An alternative way would be to collect information from a part of the population
by taking a sample of elements from a big group on the understanding that the information
collected from the subset can be used to infer something about the big group. The researcher
defined the target group for the research with care to ensure that the target population is properly
sampled and not any other population as a result of an irrelevant or incomplete sampling frame.
Sampling techniques can be split into two general categories of probability and non-probability
samples. With a probability sample, every member of the population has a predetermined non-
zero chance of being incorporated in the sample. With non-probability samples, there is no
means of estimating the probability that any population element will be part of the sample. The
researcher adopted the non-probability method which depended on personal judgment in the
sample selection process rather than on a mechanical process to select sample members. Though
these judgments may in some instances deliver satisfactory estimates of a population
characteristic, there is no means of establishing, without bias, if the sample is sufficient.
This study used a non-probability sampling method and purposive sampling technique as the
researcher knew about the population and had to focus on key managers, supervisors and
technical staff from Bulawayo domestic taxes. The researcher found it worthwhile to interview
management as opposed to junior staff as the research question is more at policy level than
operational level. Moreover, the concept of voluntary compliance is a technical field which is not
yet fully appreciated in Zimbabwe, hence, the need to gather information from people who are
well informed about the concept.
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3.4 DATA COLLECTION METHODS
Data can be defined as “facts presented to the researcher from the study environment” Cooper
and Schindler, (2003:222). As observed by Cooper and Schindler (2003), the way data is
collected assumes that it is going to yield valid information.
There are several methods of data collection but in this study the researcher used interviews and
questionnaires. The researcher decided to use personal interviews as voluntary compliance is a
highly technical concept and is not fully appreciated in Zimbabwe.
Personal interview method was used to implore primary data responses through direct
questioning. In order to obtain information related to the objectives of this research, selected
taxpayers and ZIMRA managers and staff working in Bulawayo Domestic tax and Technical
services were interviewed to grasp the practical approach to improve voluntary compliance.
Face-to-face interviews were conducted only with the three managers, 2 supervisors, nine senior
staff from Bulawayo domestic taxes, four tax consultants and ten clients to get an in-depth
understanding of their feelings towards the concept of voluntary compliance and possible ways
to improve it. Personal interviews can be regarded as an interpersonal role situation in which an
interviewer asks respondents’ questions designed to obtain answers pertinent to the objectives of
the study. One of the advantages of the face-to-face interviews is flexibility as it allows the
interviewer to assess opinions and attitudes more readily by recording non-verbal and verbal
behaviour. Thus the interviewer is able to keep the respondents interested and responsive until
the end of the interviews.
The research used two types of questions in questionnaire namely open ended and closed-ended
questions. Open-ended questions were used where clarity was required. To avoid bias the
questions were clear and precise. A questionnaire was used to obtain information from
management and other employees from Bulawayo domestic taxes, tax consultants and clients
who could not be met in person. The questionnaires were delivered to the respondents through e-
mail and hand delivery. Some of the questionnaires were administered through personal
interviews, as they were relatively short. The questions in the questionnaire were also used
during structured interviews
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3.5 SECONDARY DATA COLLECTION
The study also utilized secondary data from various sources. Usually, information that one
requires is already available as secondary data, or data that have been assembled for a reason not
directly related to the problem under consideration. Such data may be available in the form of
trade literature that discusses similar cases.
Despite the fact that secondary data does not usually solve a specific problem, it often assists the
researcher to better appreciate the problem at hand, it improves on the data collection exercise
and it provides comparative data against which primary data can be tested as well as interpreted.
The disadvantages of secondary data are that they are often assembled for reasons other than to
address the current problem and hence will unlikely fit the problem at hand. The difficulties of fit
are more pronounced in cross country studies, as the approach is bound to vary in collection of
data and presentation of findings. In some cases, the fit will be so poor as to render the data
totally unusable.
In the circumstances, the researcher decided to use a combination of both primary and secondary
data in order to improve the quality of data used in this research. The secondary data collection
included:
3.5.1 Documentation
This involved analysis secondary data by consulting textbooks on taxation, Taxation Law, tax
administration, legal texts of other countries, documentation from ZIMRA, websites of other tax
administrations, papers presented in national and international seminars, conferences and
workshops. Comparative method was used to carry out a relative study of policies and principles
from tax systems of other countries. The identified best practices applied by those countries were
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recommended to be adopted by ZIMRA .The scientific method was an essential tool in the
interpretation of different text books and legal texts that were consulted during this work.
3.5.2 Internet
Data collected from the Internet was relating to the voluntary compliance and issues relating to
legal and administrative controls implemented by other revenue administrations in other
countries across the world.
3.6 LIMITATIONS OF THE RESEARCH METHODOLOGY
The present study has a number of methodological limitations:

1. There are limited theoretical frameworks that are statistically sound in the Zimbabwean
situation, as few studies have been done in the field of voluntary compliance
2. The limited understanding of the concept of voluntary compliance may have affected the
quality of responses
3. The study focused mainly on taxpayers in Bulawayo which primarily constitute the
second largest portion of taxpayers in Zimbabwe. No attempt was made to incorporate
other cities like Harare, Masvingo and Mutare. The findings are not necessarily a
generalisation of all taxpayers.
4. Data was collected from Bulawayo thereby limiting its applicability as a representative
sample of the entire taxpayers in Zimbabwe
3.7 CONCLUSION
This chapter described the research methodology. The purpose of a research design is to
maximise valid answers to a research question. This was achieved by using a non-experimental,
qualitative, exploratory-descriptive approach that was circumstantial. The researcher was main
data collection instrument. Data was collected by means of interviews and questionnaires. The
researcher made sense of data by using a descriptive method to analyse it and also ensured that
the data was dependable. Observing the values of human dignity as well as impartiality
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safeguarded that the participants were morally and ethically protected. Chapter 4 discusses the
data analysis and findings.
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CHAPTER 4
DATA ANALYSIS AND PRESENTATION
4.1 INTRODUCTION
This chapter focuses on data presentation, analysis and the interpretation on how to improve
voluntary compliance by taxpayers. The main findings of the study are presented, analysed and
interpreted in this chapter. Data Analysis simply involves the ordering and structuring of data to
produce knowledge. Data presentation is done by using tables, bar graphs and pie charts.
Content analysis was used in relation to observations that were made. This was also found
appropriate particularly where respondents either gave suggestions or expressed their opinions.
Questionnaires, interview schedules, and document analysis were mainly used to collect research
data. The presentation of these data gives a greater insight into what methods the researcher used
to analyse it.
4.2 DESK RESEARCH– Internet Research on Rwanda Revenue Authority
Table 1. Showing the cases that were investigated by RRA in 2007 and 2008
Description of cases investigated Year 2007 Year 2008

Number of Cases investigated 11 14
Assessments made (RWF) 1.046.295.217 4.085.621.404
Principal Taxes 603.663.392 1.999.209.308
Fines and Penalties 442.631.825 2.086.412.096
Prosecutions 2 2
Pending cases 2 2
Successful prosecutions --- ---
Source: RRA Annual Report, 2008, p.2
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The table above shows the numbers of domestic tax offences were investigated by RPD,
assessments made including principal taxes penalties and the number of Prosecutions including
pending cases and successful prosecutions. As it can be witnessed below, no successful
prosecutions were made in both 2007 and 2008. Even though there are many legal provisions
that provide for imprisonment of tax offenders, practically, there are very few cases where the
tax offenders were taken to court to be prosecuted and be sentenced to imprisonment
Table 2. Summary of disciplinary measures that were taken by RRA.
Dismissal Last written First written Oral warning Acquittal Total

warning warning
16 ( 9 for corruption 4 26 2 12 60
& tax evasion; 7 for
other malpractices)
Source: Quality Assurance Annual Report for 2008, page 5.
As it can be observed above the ‘the prevention is better than cure’ approach is not put in place
rather than applying the sanctions when the case of corruption has already taken place.
Dismissals and other disciplinary actions can minimize corruption but they cannot eradicate
them.
4.3 INTERVIEW SCHEDULE
The researcher used personal interview schedules to conduct interviews with management,
supervisors, senior staff at Bulawayo taxes department and other clients in the city of Bulawayo.
The table below shows the number of people approached and those who agreed to have an
interview with the researcher
Table 3. Showing the population approached and interviewed
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Targeted Approached Interviewed % of

population approached
Management 4 3 75
Supervisors 5 2 40
Senior Staff 15 9 60
Tax consultants 6 4 67
Clients 20 10 50
Total 50 28 56
Source: Primary Data
56% of the total clients approached agreed to have an interview with the researcher whilst 30 %
refused to have the interviews due to different reasons.
4.3.1 FINDINGS
The findings the researcher got from the interviews are as follows:
i. 40 of the clients interviewed were part of the large clients segment while 60%
were small and medium enterprises
ii. 70% of the interviewees responded that the effectiveness of voluntary compliance
leads to increase in revenue collection to beef up government coffers
iii. Most interviewees highlighted lack of taxpayer education and assistance as the
major cause of taxpayer non-compliance
iv. 90% of the respondents believed that the legislation is sufficient in terms of
combating taxpayer non-compliance
v. 85% of clients and tax consultants said that the tax legislation was negatively
affecting their financial decision making
vi. All the respondents suggested that there is high need for Zimra to assist in
creating awareness of the benefits of voluntary compliance
4.4 OBSERVATIONS
After carrying out a critical observation of procedures applied in the control of the tax violations
and non-compliance, the current flaws in tax control mechanisms are acknowledged and there is
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high need to address those weaknesses which include limited powers of access to information for
tax audit and investigation, lack of effective punishment of tax offenders, inefficient registration
and de-registration procedures, limited taxpayers education and assistance; and limited control of
corruption among tax officials. The policies to address these problems are proposed in the fifth
chapter.
4.5 QUESTIONAIRE RESPONSES
The researcher sent out 50 questionnaires to various tax consultants, clients and staff at
Bulawayo taxes department and 42 questionnaires were returned. The researcher will present the
findings from each and every question in the questionnaire.
Table 4. Showing the number of Questionnaires responded
Targeted population Sent Out Returned
Zimra Employees 20 17
Tax Consultants, Bookkeepers 30 25

and General Clients
Total 50 42
4.5.1 Responses from Clients
Responses from the clients were objectively distributed, but with considerably more of the
respondents coming from the large taxpayers who are usually compliant and in continual contact
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with the client care department and thus could do some follow ups. See the following
distribution below which shows the percentage responses from the clients
Responses from clients
Small taxpayers Large taxpayers

40% Small taxpayers
Large taxpayers
60%
Fig 1. Pie chart showing responses from clients

Source: primary data
The results above reveal that large clients are more cooperative in terms of responding to
interviews and questionnaires on tax issues than small taxpayers.This could be so because large
tax payers are more compliant than small tax payers and have nothing to hide whilst small
taxpayers prefer the least possible corespondences with ZIMRA.
4.5.2 Scope of Entities
Table 5. Responses on size of Entities

Option No. of responses % of responses
Less than 2 nil 0

2-4 4 16
4-6 10 40
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6-7 7 28
+7 4 16
Total 42 100
Source: Primary data
16 % of the responses indicated that they consider their business to be on the proportion of 2-4
which indicates that they are small enterprises. 40% of the responses indicated that their business
were between 4-6 on the proportional scale which shows that the majority were small to medium
enterprises while 28% of responses indicated that the businesses were medium to large. 16% of
the respondents felt that businesses falls on the category +7 which indicates that their businesses
were large organisations.
4.5.3 Tax heads registered for
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responses
6
5
24
9
VAT
PAYE
Income Tax
presumptive tax
capital gains
withholding tax
33
42
Fig 2.Pie chart showing responses on Tax Heads which clients were registered for.
100% of the responses from clients indicated that they were registered for PAYE, while 79%
were registered for Income Tax, 57% were registered for VAT, 21% were registered for
presumptive tax, 12% were registered for capital gains tax and 14 % were registered for
withholding tax
4.5.4 Effects of non-compliance
Table 6. Opinions on effects of non-compliance on Zimra’s strategies of collecting revenue

Option No. of response % of response
Strongly agree 23 55
Agree 13 31
Not Sure 2 5
Disagree 3 7
Strongly Disagree 1 2
Total 42 100
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The results of this question clearly illustrates that non-compliance highly affects Zimra’s
strategies of revenue collection as almost 86% of respondents agree to it.In other words, failing
to comply with ta legislation leads to a reduction in revenue collected by Zimra
4.5.5 Restricting the effects of non-compliance
Responses
33
Number of respondents
7
2
yes no it depends
Options
Fig 3. Opinions on whether effects of non-compliance can be restricted
Source: Primary data
Most respondents, at least 79% believed that by restricting non-compliance, revenue collection
can be enhanced. In other words, Zimra must implement policies which promote voluntary
compliance in other to improve revenue collection. 17% of the respondents highlighted that
restricting non-compliance can increase revenue collection depending on commitment from
Zimra to improve voluntary compliance and favorable changes in the economic situation in
Zimbabwe
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4.5.5 Compliance by way of interests or penalties
responses
24% Nearly Always

often
40% sometimes
Never
19%
17%
Fig 4. Responses on whether the clients were forced to comply by way of interests or penalties
From the pie chart above it can be observed that only an average of 40% of the respondents have
never been forced to comply with tax administration by way of penalties or interests. These
results show that tax payers are less inclined to voluntary compliance with only 40% of clients
being compliant at all times. This could be so because clients are not aware of the benefits of
voluntary compliance and some of the clients try to avoid payment of tax. The 43% of clients are
nearly always or often forced to comply by way of penalties or interests, this is mainly because
of ignorance of the provisions of taxes legislation
4.5.6 Prevailing income tax and PAYE rates
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Responses
20
18
16
14
Strongly Agree
12
Agree
10 Not Sure
Disagree
8
Strongly Disagree
6
4
2
0
Option
Fig 5. Opinions on whether income tax and PAYE rates make budgeting difficult
The results of this question clearly illustrates that rates of tax do not affect financial decision
making or forecasting, because 67% of the respondents disagreed or strongly disagreed that it
affected their budgeting and financial decision making. In other words the amounts of monies
paid for taxes are not so huge or unrealistic to hinder an organization’s decision making hence
there is no good reason for non-compliance. From the questionnaires issued out, it was noted that
small and informal taxpayers usually operating briefcase companies mostly agreed that tax rates
were exorbitant and greatly affected their financial planning. This is mainly because such
organizations do not maintain proper records and cannot differentiate between sales and profit,
and the general idea that profits should be above 100%.
4.5.7 Concept of self-assessment
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Responses
2%
21%
76%
yes No Can't Tell
Fig 6. Views on the concept of self-assessment

Majority of the respondents noted that self-assessment could give rise to voluntary client
compliance as compared to the traditional methods as a client does his own assessment of his tax
obligations and this motivates the client to submit their returns on time. It allows a client to fully
understand the background to taxes that they owe to ZIMRA than for ZIMRA officers to
calculate their tax obligation, which means lesser queries. However it can be sited that some
clients might have seconded the self-assessment approach in order to increase their freedom of
discretion with regards to the information that they supply for tax purposes.
A minority of the respondents noted that this could be an escape route for clients who are non-
compliant creating fake records and amending originals so as to pay lower taxes hence resulting
in ZIMRA losing huge amounts of revenue. It was further noted that self-assessment meant the
client hiring a consultant if the client is not averse with tax calculations which means more
expenses for the client. This hindrance might result in the client completing the returns by
themselves incorrectly or even being reluctant to submit them at all hence compromising
voluntary compliance.
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4.5.8 Efficiency of Tax administration systems
Table 7. Showing views on the efficiency of tax administration systems in Zimbabwe

Option No. of Response % of Response
Efficient 12 29
Average 22 52
Inefficient 8 19
Total 42 100
52% of the respondents highlighted that tax administration systems in Zimbabwe are neither
efficient nor inefficient as they are operating at a medium or average level.
4.6 CONCLUSION
This chapter explained the data analytical tools as well as the analytical aspects of the study by
first and foremost bringing to the reader’s attention the characteristics of the data that was
collected. The results show that clients believe that enhancing voluntary compliance creates high
chances of increasing revenue collection. The results depicts that the concept of self-assessment
is key in improving voluntary compliance. The succeeding chapter will therefore concentrate on
bringing out the required conclusion emanating from the findings through critical evaluation,
suggesting feasible recommendations as well as the possible implications to management
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CHAPTER 5
CONCLUSION AND RECOMMENDATIONS
5.1CONCLUSION
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This research has explored the many current issues connected with improving voluntary
compliance in Zimbabwe. It is normal to ask whether any conclusive resolutions can be expected
in order to construct a more effective and equitable system of addressing the issue of voluntary
compliance in Zimbabwe. Unfortunately, many countries are wrestling with similar problems
although most have a much longer legislative history in comparison with Zimbabwe. The
collective resolution is a steady development of tax legislation accompanied by eradication of
systemic difficulties.
Whilst there are many operations that ZIMRA can do to avoid, identify and deal with different
types of tax violations and non- compliance, it should be recognised that the effective technique
of combating of such does needs to be approached at the whole of government level. Those who
commit tax violations are possibly committing frauds against more than one government
department or agency The opportunities to achieve success in addressing tax violations and non-
compliance are enabled by an atmosphere which embraces the rule of law, an obligation to battle
corruption, and coherent tax policies.
A well-functioning tax administration, perceived as treating all taxpayers impartially and with
respect and concerned with collecting only the proper amount of tax, goes a long way towards
attaining the goal of voluntary compliance which benefits everyone. While no one enjoys paying
taxes, seeing others escaping the tax net while you are attempting to pay your fair share is even
less interesting. The general public should therefore be encouraged to spread the word of
voluntary compliance.
The preventive measures should be given priority over punitive measures while tackling the
issue of voluntary compliance. This should be the principle of legislation and enforcement.
Voluntary compliance can be enhanced by making tax laws less complex and leaving less scope
for subjective decision. The goal of taxpayers is to maximize their financial position; as such
they will continue to evade taxes as long as benefits from non-compliance outweigh the risk of
detection and punishment.
5.2RECOMMENDATIONS
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ZIMRA needs to frequently review its systems, strategies and skills to keep pace with the
problem of tax violations and non-compliance. That is why the researcher suggest the following
means as a better way to control tax offences: there should be opportunities for voluntary
disclosure; more powers to get information for audit and investigation purposes should be
provided to tax officials; prosecution, imprisonment and publication of tax offenders should be
applied to those convicted of tax offences; the external appeals mechanism should be enhanced;
Taxpayer Registration and De-registration procedure should be improved and every effort should
be made to stamp out corruption that is still existing among some tax officials
5.2.1 Statutory Mechanisms Suggestions
The proposed statutory mechanisms to be applied in improving voluntary compliance included

provision of more powers of access to information; Prosecution, and publication of tax offenders;
and Enhancing the external appeals mechanism.
5.2.1.1 Provide more powers of access to information
As it was witnessed in the earlier chapter, most of the information used by tax auditors in
ZIMRA is from the taxpayer himself. ZIMRA should have more powers to get information from
third parties during audit and investigation. Tax auditors should have access to the records of
anyone who has financial transactions with taxpayers and who can provide relevant information
on taxpayers' income and the accuracy of their tax declarations and books and records. Obtaining
information from other government departments and relevant private sector organisations for risk
identification and assessment, and data-matching is recognised as an effective way of
discovering tax violations practices. For example, external sources of information can improve
exposure of unreported income and assets. However, information sharing with the private sector
can be difficult and is usually one-way because organisations have no incentive to provide this
information. Their desire to protect the confidentially of their clients is also a key barrier.
Therefore, effective provision of information usually requires changes to the legal framework.
5.2.1.2 Opportunities for voluntary disclosure
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Voluntary disclosure is another vital source of information. This gives a reflection of

transparency in the system and encourages the taxpayers who are willing to comply to come
forward and settle their tax disputes with the ZIMRA.
Voluntary disclosure is a system where a taxpayer discovers that he/she did not declare the right
amount of tax or finds himself engaged in non-complying activities and he is given the time to
come forward and report information related to these activities to the tax administration. For
example, in some cases, taxpayers may not pay their tax on time because of severe personal
circumstance or have unintentionally provided incorrect information or made an honest mistake
on their tax return. The taxpayer then decides to approach the tax administration and makes a
disclosure of such errors. In these circumstances, if ZIMRA came down heavily on the taxpayers
with punishments and penalties, the taxpayers are likely to ‘rebel’ and lose respect for the tax
authority – this is likely to have an impact on future compliance behaviour as well.
From the above point of view, Taxpayers should be allowed some chance to exercise their
responsibility as far as tax liability is concerned and this would be through voluntary disclosure.
ZIMRA should allow taxpayers to come forward and correct inaccurate or incomplete
information or disclose material they did not report during previous dealings with the ZIMRA,
without penalty or prosecution. By making a full and complete voluntary disclosure, a taxpayer
will get the advantage of reduced levels in any shortfall penalty imposed.
The following are the expected benefits in case of implementation of voluntary disclosure:
i. It is a customer-focused approach that improves the level of compliance.

ii. It is a system that is geared at reducing costs of collections.
iii. It makes it as easy as possible for taxpayers to understand and comply with their
obligations.
Finally, ZIMRA having a self-assessment system where taxpayers are given the opportunity to
determine their tax liability, should adopt voluntary disclosure as one of the tools to encourage
voluntary compliance. This recommendation has been made in consultation through research
with other progressive countries.
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5.2.1.3 Tax amnesties
Another important source of information is the use of amnesties. The basic idea of an amnesty is
to encourage taxpayers to come forward and pay their long-past-due obligations and can be used
to bring new taxpayers into the tax net. Tax amnesties have been used by a number of countries
with varying levels of success
In order to succeed, they should contain consequence components and be supported by strict
enforcement and compliance activities. Heavy publicity that is of both the amnesty itself and the
consequences of not complying also helps to maximise the effectiveness of the tax amnesty. An
important point to remember is that amnesties can also be used when a change in tax law
highlights previous, possible unintentional, non-compliance.
It is very significant to appreciate that the proposal is not about simply letting tax law offenders
off the hook. Rather, it is about improving the incentive to come forward for those who are
willing to begin complying with the law, allowing ZIMRA to concentrate more resources on
those who continue to not comply with their tax obligations.
5.2.1.4 Unexpected audits
Zimbabwean tax law should be amended to give allowance for visits to taxpayer premises to be
conducted unannounced. For example, Botswana has recently introduced surprise field visits –
This has made a noticeable impact not only in the recovery of underpaid taxes, but also in the
attitudes of evaders towards the tax administration.
5.2.1.5 Anonymous shopping
Another approach to surprise visit is what is referred to as “Mystery shopping.” This approach is
commonly used for market research purposes. For example, a private sector organisation may act
as a customer at their competitor’s shop(s) to gather information on prices and practices. Some
organisations also use ‘fake customers’ to test the service quality provided by their staff.
“Mystery shopping,’’ is relatively a new measure adopted by only a few tax administrations to
control violation of tax law. Argentina for example, has introduced a legislation to enable tax
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inspectors to make false purchases in shops and apply a sanction if the mandatory invoice is not
issued upon the sale.
5.2.1.6 Prosecution and publication of tax offenders
There is a misconception that tax offences are not treated with the same seriousness as other
offences. A conviction for violation of tax law can carry the very dissimilar risk of imprisonment
as well as heavy fines and publication of tax offenders. The threat of long imprisonment and
publication of tax offenders may create some amount of fear and induce offenders to comply.
Penalty structures under Zimbabwean tax system should be ‘escalating’ in nature and range from
the administrative and criminal prosecution and imprisonment for the most serious of cases.
Effective prosecutions are also dependent on the judicial system. Unfortunately, some judges do
not see violation of tax laws as a serious crime and perpetrators are often let off with lenient
penalties or sentences, which further encourages commitment of tax offences. Hence, tax
administration should look to form stronger links to judges and include education initiatives
aimed at that segment to help them recognise the detrimental effects weak enforcement can have
on voluntary compliance.
Another component of transparency that constitutes the strongest mechanism to control non-
compliance is undoubtedly the publicity given to prosecution and conviction of individual tax
offenders. Not only can publicity be used to heighten the perception that the likelihood of
detection is high and hence encourage compliance with tax obligations, it also helps to improve
the credibility of the tax administration by showing taxpayers that it can and will actively pursue
those who choose to violate the law. Even company boards will realise that publicity, namely
‘naming and shaming’ attacks on alleged tax offenders will damage their reputations in the eyes
of important stakeholders, which can lead to sharp short-term share price falls and the
unwelcome attention of tax authority.
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5.2.1 Administrative Mechanisms proposals
The administrative mechanisms proposed under this section to improve voluntary compliance
include: Enhancing Taxpayer Registration and De-registration, Augmenting taxpayer assistance
and education programs, Stamping out corruption.
5.2.1.1 Enhance taxpayer registration and de-registration
Non-compliance cannot be controlled without knowing the actual number of taxpayers in the
country. This number can be established through proper registration and de-registration
procedure. ZIMRA should provide an accurate register of all taxpayers by recognising active and
passive ones. The taxpayer registration can be enhanced by improving the quality of taxpayer
register and strengthening taxpayer recruitment exercise.
The measures that can be taken to improve the quality in taxpayer registration include the
following:
i. Taking on board an effective procedure that will ensure that all taxpayers are registered
within the time stipulated by the law.
ii. Setting up standard forms of registration that are comprehensive enough to exclusively
identify and locate a taxpayer
iii. Adopting an effective mechanism that ensures the updating of a taxpayer’s registration
information whenever changes occur in the status of the taxpayer
iv. Ensuring that there are adequate mechanisms for monitoring de-registered taxpayers
v. Putting in place adequate procedures for monitoring the growth or decline of taxpayers’
revenues that may qualify them for an advanced or lower level of registration
vi. Allowing online application for a tax de-registration. This will reduce compliance costs
and administrative burdens
vii. Considering notifying a taxpayer that he/she is de-registered using e-mail or registered
mail. This will reduce compliance costs and administrative burdens
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5.2.1.2 Augmenting taxpayer assistance and education programs
Taxpayer education and assistance programs should be improved through providing information
and other tools to taxpayers, giving special attentions to small businesses, visiting taxpayers’
premises and providing relevant information to new taxpayers.
The administrative problem of tax compliance has been shown to fall more heavily on small
businesses than on large businesses. From this background, a detailed program should be
implemented to assist those new to business to get established.
Visits to business premises are also helpful because they offer a personalised and direct approach
to assistance, but these visits need to be wisely pitched because they could be regarded as an
enforcement approach, leading to more anxiety and fear. It is more common to establish call
centres where taxpayers can access to seek assistance or information to help them comply, or to
conduct seminars or workshops for groups of taxpayers.
ZIMRA should also consider starting an on-boarding program for new taxpayers. When
taxpayers register with the ZIMRA, they should be provided with all the essential information,
tax returns and instructions they will need to meet their filing and paying requirements. The new
taxpayers should be educated of their responsibilities as taxpayers and what they are expected to
do to enhance compliance with tax laws.
ZIMRA should also expand a range of electronic services provided such as ZIMRA website,
online registration and e-filing It is believed that there will be an increase in the number of
taxpayers and tax advisers taking advantage of the ease and convenience these services provided.
5.2.1.3 Stamping out corruption
In order to restrict corruption in ZIMRA, tax officials must be adequately compensated, so that
they do not need to steal to live. They should be professionally trained, promoted on the basis of
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merit, and judged by their observance to the strictest standards of legality and ethics. Tax
officials should have relatively little direct contact with taxpayers and even less discretion in
deciding how to treat them.
ZIMRA should be adamant to its code of conduct. This include declarations of outside business
activities that present a possible conflict of interests, including those of close family members.
Every new staff should be provided with a copy of staff code of conduct. Likewise, regular
declarations of assets should be emphasised and regularly cross-checked. Gifts and hospitality
are a common issue of concern for revenue collectors, as they, by definition, have regular
dealings with clients.
Simplification of payment procedures and greater efforts on educating those involved in the
transactions are very important. If clients know what is required, and can do it unaided, they will
be less motivated to corrupt revenue officers for assistance. If possible, officers should not be
permitted to accept cash tax payment in the field. Ideally, all payments should be made by
taxpayers directly to banks.
Fertile ground for the payment of bribes is provided when irregularities are discovered by
auditors. It is important for ZIMRA managers to deploy teams to undertake specified tasks rather
than to allow staff to select their ‘targets’. Further, there must be risk-based management controls
over the conduct of the work, including accompanied or follow-up visits, and thorough checking
of reports. It may also be necessary to have a programme of follow-up visits by an effective,
risk-based, internal audit team supported by external audit controls.
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REFERENCES AND BIBLIOGRAPHY
1. ALLAN, C., The Theory of Taxation, Penguin Books LTD, UK, 1971.
2. Australian Taxation Office, “Compliance Program 2005-06” Available at:
http://www.ato.gov, Accessed on 15th March 2015.
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NOREST USHE
3. BURNIE, E. & MICHELMAN, M., “Compliance and Avoidance ', International Tax
Review”, available at: http://www.internationaltaxreview.com , accessed on 20th January
2015.
4. Canada Revenue Agency, “Voluntary Disclosures Program”, available at:
http://www.cra, accessed on 15th May 2015.
5. FARLEX, “The Free Dictionary”, available at: medical-dictionary.the-
freedictionary.com, accessed on 8th April 2015.
6. MARTIN, D. “Tax Simplification: How, And Why, It Must Be Done”, available at:
http://www.cps.org.uk/pdf/pub/407.pdf, Accessed on 15th March 2015.
7. NICHOLAS, T., Taxation in Kenya (Principles and Practices), Nairobi, 2003.
8. RICHARD, M. Administrative dimensions of Tax Reform, University of Toronto, 2003.
9. RRA Annual Report for 2008: available at: http://www.rra.gov.rw, accessed on 3rd
February 2015.
10. RPD Annual Report for 2012:available at: http://www.rra.gov.rw accessed on 15th March
2015
11. RRA Compliance Report 2013: available at: http://www.rra.gov.rw accessed on 4th April
2015
12. RRA Quality Assurance Annual Report for 2008 available at: http://www.rra.gov.rw
accessed on 3rd February 2015
13. RRA Taxpayer Service Annual Report for 2012 available at: http://www.rra.gov.rw
accessed on 15th March 2015
APPENDICES
APPENDIX A: QUESTIONNAIRES
Client Care and Data processing
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Zimbabwe Revenue Authority
Mhlahlandlela Government Complex
PO Box 601
Bulawayo
To the respondent,
My name is Norest Ushe and I am doing a research project for the Advanced certificate in
Customs and Taxation for the Zimbabwe Revenue Authority. My topic of choice is “An
exploration on policies that can be employed by ZIMRA to increase voluntary compliance
to tax systems.”
Your participation in this survey is of great importance to the research and is invaluable to
making it a success.
I will personally be administering the survey and all information will be kept confidential and
not be divulged to anyone for any reason.
May you therefore kindly assist by completing the following questionnaire and returning it to the
person who gave it to you or forwarding it to the above address.
Thank you for taking time out to fill in this questionnaire.
Yours sincerely
Norest Ushe
Email: nushe@ZIMRA.co.zw
QUESTIONNAIRE TO ZIMRA EMPLOYEES
Tick in the appropriate box
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1. Gender: male female
2. Age:
18-25yrs 26-35yrs 36-45yrs +46yrs
3. Level of education:
Ordinary Level Advanced Level Certificate/Diploma Degree
4. Duration of employment:
Below 1 year 1-3years 3-5years 5-10years +10years
5. In your opinion, what is the main cause of tax non-compliance?
Ignorance Limited Knowledge uncertain circumstances
6. Do you agree that non-compliance affects ZIMRA’s strategies of collecting revenue?
Strongly agree Agree Not Sure Disagree Strongly

Disagree
7. Can the effects of non-compliance be restricted in order to enhance revenue

collection?
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Yes No It depends
8. If your answer to the question above is “it depends”, please explain?

………………………………………………………………………………………………………
………………………………………………………………………………………………………
………………………………………………………………………………………………………
………………………………………………………………………
9. Do you agree that forecasting and budgeting becomes difficult or rather misleading
given the prevailing income tax and PAYE rates?
Strongly Agree Agree Not Sure Disagree Strongly

Disagree
10. Given this new concept of self-assessment, do you think it can give rise to voluntary
client compliance as compared to the traditional methods?
Yes No Can’t Tell
11. How would you describe the tax administration systems in Zimbabwe?
Efficient Average Inefficient
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QUESTIONNAIRE TO: CLIENTS, BOOKKEEPERS AND TAX CONSULTANTS
1. Indicate where you belong by putting an x in one of the boxes provided.
Registered client Bookkeeper Tax Consultant
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2. If you were to proportion the scope of your entity numerically on a zero to ten scale,
what scope would you give it?
Less than 2 2-4 4-6 6-7 +7
3. What tax heads are you registered for which are currently active?
PAYE VAT Withholding Tax
Income Tax Presumptive Tax Capital gains tax
4. For how long have you been trading and how have you been able to go about your
tax issues?
Less than 5yrs 5yrs 10yrs More than 10yrs
5. Do you agree that non-compliance affects ZIMRA’s strategies of collecting revenue?
Strongly agree Agree Not Sure Disagree Strongly

Disagree
6. In your opinion, what is the main cause of tax non-compliance?
Ignorance Limited Knowledge uncertain circumstances
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7. Can the effects of non-compliance be restricted in order to enhance revenue

collection?
Yes No It depends
8. If your answer to the question above is “it depends”, please explain?

………………………………………………………………………………………………………
………………………………………………………………………………………………………
………………………………………………………………………………………………………
………………………………………………………………………
9. Have you ever been forced to comply with tax administration by way of interests,
penalties?
Nearly always Often Sometimes Never
10. Do you agree that forecasting and budgeting becomes difficult or rather misleading
given the prevailing income tax and PAYE rates?
Strongly Agree Agree Not Sure Disagree Strongly

Disagree
11. Given this new concept of self-assessment, do you think it can give rise to voluntary
client compliance as compared to the traditional methods?
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Yes No Can’t Tell
12. How would you describe the tax administration systems in Zimbabwe?
Efficient Average Inefficient
APPENDIX B: INTERVIEW QUESTIONS
1. Can you give a general description of your business?

2. Can you give an estimate of the tax paid for previous tax periods by tax type, such as
income tax (QPD), VAT, PAYE and/or withholding tax?
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3. What is your view in relation to effectiveness of voluntary compliance to the collection

of tax in the Zimbabwean economy?
4. What do you think are the main causes of non-compliance with regards to taxation
issues?
5. In your opinion to what extent is the tax legislation sufficient in the regulation of tax
compliance?
6. How has the tax legislation of Zimbabwe been influencing your financial decision
making?
7. Do you think there is need for assistance and in what form, from ZIMRA or the
Government in creating awareness on the benefit of voluntary compliance?
8. What have been the problems encountered in the effort to ensure compliance in this
Region?
9. How can ZIMRA enforce voluntary compliance in this Region and what remedies are at
their disposal?
10. What can ZIMRA do to ensure that compliance measures are used fully within the
organization?
56

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RESEARCH PROJECT

IN PARTIAL FULFILLMENT OF REQUIREMENTS OF

ADVANCED CERTIFICATE IN CUSTOMS AND TAXATION

AN EXPLORATION ON POLICIES THAT CAN BE EMPLOYED BY

ZIMRA TO INCREASE VOLUNTARY COMPLIANCE TO TAX

Training Centre for acceptance, a dissertation entitled:

Submitted by …………………………………….. in partial fulfilment of the ZIMRA Revenue

Norest Ushe (Researcher)

Irene Rwatida (Supervisor)

CGT Capital Gains Tax

OECD Organisation for Economic Co-operation and Development

PAYE Pay As You Earn

RRA Rwandan Revenue Authority

SAP Systems Application Program

SARS South African Revenue Service

VAT Value Added Tax

VDP Voluntary Disclosure Program

ZIMRA Zimbabwe Revenue Authority

3.2 RESEARCH DESIGN.................................................................................................................20

INTRODUCTION AND BACKGROUND

1.2 BACKGROUND OF THE STUDY

1.3 PROBLEM STATEMENT

Taxpayers reveal unpredictable levels of tax compliance. As a way to curb noncompliance,

1.4 RESEARCH OBJECTIVES

1.4.2 Specific objectives

1. Ascertain legal and organisational measures used by ZIMRA to address noncompliance

2. Enhancement of statutory and administrative mechanisms such as tax payer education

1.6 RATIONALE OF THE STUDY

1.7 RESEARCH QUESTIONS

1. Is ZIMRA at presently employing effective compliance management principles?

1.10 RESEARCH METHODOLOGY

1.10.1 Scope of the Research

1.10.2 Target Population

1.10.3 Sample size

1.10.4 Techniques to be used:

This involved examination of secondary data by referring to textbooks on taxation, Taxation

1.10.5 Sampling Methods

Target sample was applied to Section Managers and Supervisors.

1.10.6 Data Collection Instruments

2.2.2 Voluntary Compliance

2.3 CAUSES OF NON-COMPLIANCE

2.3.1 Complexity of tax laws systems and procedures

2.3.2 High rates of taxes

2.3.3 Limited resources and capacity of tax administration

2.3.4 Views towards taxation and historical factors

2.3.5 Corruption among some tax officials

2.3.6 Low literacy and lack of tax education

2.3.7 Technological progresses

2.3.8 Poverty and nature of production

2.4 IMPACTS/ CONSEQUENCES OF NON-COMPLIANCE

2.4.1 Consequences on the government

According to Smith K, (1987) Understanding taxpayer Behaviour, page 639; non-compliance

2.4.2 Consequences on the tax offender

2.5 AN ANALYSIS OF NON- COMPLIANCE CONTROL

2.5.1 Control of corruption among tax officials

2.5.2 Registration and deregistration of tax payers

2.5.3 Obtaining information through audit and investigation

2.5.4 Sanctions for non-compliance

According to a compliance report by Rwandan committee of experts on Tax compliance (1998),

2.5.5 Taxpayer education and assistance

2.5.6 Voluntary Disclosure Programme

3.2 RESEARCH DESIGN

3.3 SAMPLE DESIGN