Abstract:
Value added tax (VAT) is one of the main modes of raising tax revenue worldwide but has significantly underperformed
as a revenue collection tool in Africa. Non-compliance by taxpayers is a major challenge. This Misum Academic Insight
explores the extent to which Tanzanian businesses are VAT compliant and the factors explaining compliance.
Practical problem: The Government of Tanzania is striving to improve the effectiveness of its VAT regime and reduce tax
evasion through a combination of measures. Initiatives have included improved tax legislation and more effective
administrative processes. Electronic Fiscal Devices (EFDs) were introduced in 2010 with the ambition of reducing administrative
and compliance costs for the Tanzania Revenue Authority (TRA) and businesses. They were designed to ensure more accurate
reporting of VAT by automatically transmitting information about sales and other transactions to the TRA. However, VAT
collection has not improved as expected after the introduction of the EFDs. For the EFDs to improve VAT compliance it is
crucial that businesses use them to register transactions, which is required by legislation.
