Assessing the Influence of Tax Rate and Penalties on Tax Compliance in Tanzania

Abstract

The purpose of this study is to evaluate the effect of tax rate and tax penalty on business owners in Tanzania. The study wanted to validate the Economic Deterrent Theory on Tax Compliance The approach used was a survey strategy on the research process undetaking. The 400 sample of respondents were selected from the targeted population. Structural Equation Modelling was utilized on the analysis. The results showed that tax rate and the tax penalty do not significantly influence tax compliance among business owners in Tanzania. The findings disconfirm the economic deterrence theory. Therefore, tax authorities in Tanzania should explore other determining factors beyond tax rate and tax penalties to enhance tax compliance among business owners.