CHAPTER THREE

3.0 TAX AND TAX COMPLIANCE

In this chapter it explain the concepts of tax compliance and taxes that are administered by
central government and local government authority and measures against non-complaint tax
payers.

3.1Tax compliance

Refers to the act of following the rules and regulation set forth by the government through TRA
regarding the payment and reporting of taxes. This includes accurately reporting all income ,
filling tax returns on time and paying all taxes in full and on time

3.2 Types of tax compliance

There are two types of tax compliance which are;

 Voluntary tax compliance

 Involuntary tax compliance or Forced compliance

3.2.1 Voluntary tax compliance

This is the situation where by taxpayer willingly comply with tax laws and regulation like fills
their tax return on time. Through voluntary tax compliance a taxpayer can avoid unnecessary
penalties.

These are the benefits of voluntary tax compliance;

 It ensure steady flow of revenue for development.

 Saves the government cost of revenue collection.
 It avoid unnecessary penalties to a taxpayer

3.2.2 Involuntary tax compliance

This is the situation when there is enforcement of taxpayer to comply with tax laws and
regulation. This occur when a taxpayer fail to fills their tax return on time and accurate income.
This occur through fines and penalties to a taxpayer.

Involuntary tax compliance can be minimized through;

 Providing education to a taxpayer through interview, training, publication ,e.t.c

 Assist the taxpayer through identifying their due dates and to know their tax liabilities.
3.3 Features of Tanzania tax administration which enhance tax compliance

 Taxpayer education and awareness.

The Tanzania revenue authority [TRA] conducts taxpayer education programs to

enhance awareness and understanding of taxpayer obligations. These programs
provide information on tax laws, filling requirement and the benefits of tax
compliance.

 Simplified tax laws and regulation.

TRA makes tax laws simple which can be easly understudied by taxpayer. When
tax laws are simplified it can reduce ambiguity to the taxpayer.

 Taxpayer services and support.

The TRA provides taxpayer services and support to facilitate compliance. This
includes taxpayer assistance centers, helpline, and online platforms where by a
taxpayer can seek guidance, ask questions and resolve tax-related issues. This
help taxpayer to understand their obligation and fulfill them correctly.
 Voluntary compliance programs
TRA encourages voluntary compliance through initiatives like the Voluntary
Disclosure program [VDP].This program allows taxpayer to voluntarily disclose
any previous tax non-compliance and settle outstanding liabilities without
incurring penalties or facing criminal prosecution. It provides an opportunity for
taxpayer to rectify their tax affairs and become compliant.
 Compliance enforcement measures.
Tanzania employs various compliance enforcement measures to deter tax evasion
and Non- compliance. These includes regular tax audits, investigation, and
inspection to verify taxpayer information and identify potential irregularities.
Penalties and sanction are imposed on Non- compliant taxpayer, acting as a de
terrent and promoting compliance.

These features collectively contribute to enhance tax compliance in Tanzania.

3.4 Taxes and non-taxes administered by central government.

Central government tax administration have duties to administer both taxes and non-taxes .

3.4.1 Taxes administered by central government.

These are the taxes administered by central government tax administration;

 Income tax
It is a tax imposed on individuals, business, and other entities based on their
income or profits Example are PAYE
 Value added tax
It is a consumption tax charged or imposed on the value added at each stage of
production and distribution of goods and services.
 Capital gain taxes
It is imposed on the profits made when a person realizes an interest in assets like
land or buildings.
 Customs duty
This tax is levied on goods imported from non-east African community member
states as well as exported out of the country.
 Gaming tax
It charged on gaming activities such as Casino, sports betting, SMS lottery, slots
(Route) operation and forty machines site.
 Cooperate tax
This tax is levied on the profits earned by a cooperation or entities.
 Stamp duty
Is the tax levied on certain type of legal documents/ transaction such as property
transaction.
 3.4.2 Non-taxes administered by central government.

 Fines and penalties

The government collects fines and penalties for violation of laws and regulation
such as penalties for fail to fills tax return or traffic fines.
 Grants and Aids
The government may provide grants or financial support or assistance to other
entities or governments.
 User charges.
These charges imposed when using certain government facilities or services like
tolls on high ways or charges for public utilities like water and electricity.
 Fees and charges.
Government collects fees and charges for specific services provided, such as
passport fees, visa fees, or licensing fees.

All these are knows as non- taxes government revenues where the governments collects revenue
to run it daily administrative function.