The Role of Small and Micro Enterprises (SMEs) on Government

Abstract

Small and Micro Entrepreneurs (SMEs) pay tax to the government. They thus become important actors for incomepoverty reduction strategies of the government authorities and donor agencies. Service delivery from thegovernment depends on their revenue collection which large part comes from tax. Tax revenue of the governmentdepends on different factors namely, the taxable capacity of the tax payers and the tax base. Entrepreneurs arecritical stakeholders of poverty reduction in any country as they form a large tax base and their capacity (revenue) isimportant for the government to have high taxable capacity which in turn enables the government to provideservices to the public. This paper intends to examine the role of entrepreneurs who pay their tax and the capacity ofGovernment to provide services which in turn reduce poverty.

Keywords: SMEs, poverty reduction, tax base, taxable capacity, and Tanzania