Impact of Online Tax System on Tax Compliance of Small to Medium Enterprises in Harare, Zimbabwe

Abstract

Online tax system platform gives Zimbabwe Revenue Authority an opportunity to interact with its clients and doing business in the comfort of their homes or offices. The e-filing of the tax returns assist in curbing the tax compliance challenges by Small and Medium Enterprises. Challenges faced by SMEs include keeping two sets of records, relocating to new premises without notifying authorities and temporarily closing business during compliance blitz. The survey study investigated the impact of online tax system on tax compliance of Small to Medium Enterprises in Harare Central Business District since Harare is the epicentre of Small and Medium Enterprises. The objective of this study was to establish the effect of online tax filing security on tax compliance among SMEs, to examine SMEs’ perception towards online tax filing system and to identify the computer literacy level of online tax filing on tax compliance of SMEs. The study adopted the theories of Technological Acceptance Model (TAM), Unified Theory of Acceptance and Use of Technology, the Theory of Reasoned Action, and the Diffusion of Innovation Theory from which the conceptual framework was developed. The Theory of Technological Acceptance Model was the most preferred because it was compatible with the self- reported study scenario and intention to use it (Ahnan, 2021). A detailed related literature review has been outlined and the variables for this research identified to be ascertaining whether online tax security assisted to improve tax compliance among Small and Medium Enterprises in Harare Central Business District (CBD), examining SMEs perception towards online tax filing in Harare (CBD) and establishing the computer literacy level of online tax filing system on tax compliance among SMEs in Harare (CBD). The study used the survey descriptive research design in which quantitative data was gathered through self-administered questionnaires and primary data techniques. The target population was 13000 SMEs. A total sample size of 389 was selected as representative of the target population using Stratified random sampling. Pilot test study was conducted to guard against using unreliable instruments. Reliability of the data collection instruments was through split- half testing. The construct validity of the instruments was tested using factor analysis and reliability using Cronbach’s alpha technique. The Statistical Package for Social Sciences (SPSS) version 21.0 was used to analyse the data collected using descriptive statistics. Data was analysed using t-test at coefficient alpha (α) level of 0.05 to test the relationship between independent and dependent variable. The results of both the correlation and regression analyses were presented. The study found out that there was a positive relationship between the computer literacy levels of online tax filing and tax compliance among SMEs in Harare CBD. The 12.2% rise in tax compliance is still below the national average, suggesting that SMEs have not fully adopted the online file system.

Keywords: Online tax system, Harare CBD, Small and Medium Enterprises, Tax compliance

DOI: 10.7176/RJFA/14-8-03

Publication date: April 30^th 2023