IMPACT OF TECHNOLOGY IN TAX COMPLIANCE AMONG SMALL

AND MEDIUM ENTERPRISES IN TANZANIA: A CASE OF ILALA

MUNICIPAL, DAR ES SALAAM

EDNA MASHAURI

A DISSERTATION SUBMITTED IN PARTIAL FULFILLMENT OF THE

REQUIREMENTS FOR THE DEGREE OF MASTER OF BUSINESS

ADMINISTRATION (MBA)

DEPARTMENT OF ACCOUNTING AND FINANCE

THE OPEN UNIVERSITY OF TANZANIA

2021
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CERTIFICATION

The undersigned certifies that he has read and hereby recommends for acceptance by

the Open University of Tanzania a dissertation entitled; “Impact of Technology in

Tax Compliance among Small and Medium Enterprises in Tanzania” in partial

fulfilment of the requirements for the degree of Master of Business Administration

(MBA).

……………………………….
Dr. Saganga Kapaya
(Supervisor)

…………………………….
Date

ii
 COPYRIGHT
No part of this Dissertation may be reproduced, stored in any retrieval system, or

transmitted in any form or by any means, electronic, mechanical, photocopying, or

otherwise without prior written permission of the author or The Open University of

Tanzania in that behalf.

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DECLARATION

I, Edna Mashauri declare that, the work presented in this dissertation is original. It

has never been presented to any other University or Institution. Where other people’s

works have been used, references have been provided. It is in this regard that I

declare this work as originally mine. It is hereby presented in partial fulfillment of

the requirement for the Degree of Masters of Business Management (MBA).

……………………………..
Signature

………………………….
Date
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DEDICATION

This dissertation is dedicated to my late lovely father and mother who have always

supported me in every move of my study.

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ACKNOWLEDGEMENT

My first and foremost thanks go to the almighty God for giving me strength and

courage to pursue my studies. Great thanks are extended to my family my lovely

husband and children, for their encouragement, morally and spiritually support

during the whole period of my studies and the research study. They accepted to

devote all they could to support my education, to cover for all family matters till the

end of this successful journey. Their encouragement, advice and support enabled me

to be in a position to successfully finalize my dissertation.

My sincere gratitude to my supervisor, Dr. Saganga Kapaya for the valuable advice,

guidance and more important the encouraging comments he has always suggested to

me on the preparation of this dissertation. His criticism, invaluable patience,

intellectual guidance and support helped me not only to accomplish this study, but

also come up with the expected standards. Sincerely, he deserves credits and

appreciation.

Furthermore, my thanks go my fellow students, workmates and my boss Mr. Vinod

Mishra for supporting me financially while excusing me from my duties in office

whenever required to do so in order to complete the preparation of this paper. I

kindly ask them to receive my gratitude. Also, I am grateful to the management and

staffs of Tanzania Revenue Authority (TRA) Ilala and Temeke Region also Business

Personnel at Ilala Region for giving me permission to conduct this study at their

offices and using their employees. Finally, to all other individuals for supporting the

production of this work while they remain anonymous, their invaluable assistance

will always be kept in my memory. Suffice it to say, may God Bless You All!
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ABSTRACT

The study assessed the impact of technology on tax compliance among small and

medium enterprises in Tanzania. Specifically had the following specific objectives;

to examine the effect of technology literacy on tax compliance among small and

medium enterprises in Tanzania, to examine the effect of system security concerns

on tax compliance among small and medium enterprises in Tanzania and to examine

the effect of system quality on tax compliance among small and medium enterprises

in Tanzania. The study was conducted in Ilala District, Dar es Salaam region and

survey method was applied in data collection from respondents. 144 respondents

were involved in the study; including TRA officers, SMEs sale electronic devices

and sale motorcycles owners from Kariakoo international market were chosen to

participate in the study. Also, multiple linear regression and descriptive analysis was

used to analyse the data. The findings revealed that technology literacy and system

quality had significant impact on tax compliance level among SMEs in Tanzania

while security concern has contribution but not significant. The study recommended

the following:- the government invest on improving and emphasising provision of

training service to taxpayers on the usage of technology in taxation; the government

to ensuring the existence of reliable technological service in order to ensure service

availability on customers need; the government to establish appropriate security

measures to secure customers information as well as company privacy; the

government to provide reliable technical support to taxpayers to reduce additional

assistance cost of using tax system or devices; and application of simple and up to

date technology to improve tax compliance to all taxpayers should be emphasized.

Keywords: Technology, Tax Compliance, Small Enterprises, Medium Enterprises.

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TABLE OF CONTENTS

CERTIFICATION........................................................................................................ii

COPYRIGHT..............................................................................................................i

DECLARATION........................................................................................................ii

DEDICATION...........................................................................................................iii

ACKNOWLEDGEMENT........................................................................................iv

ABSTRACT................................................................................................................v

TABLE OF CONTENTS..........................................................................................vi

LIST OF TABLES......................................................................................................x

LIST OF FIGURES..................................................................................................xi

LIST OF ABBREVIATIONS..................................................................................xii

CHAPTER ONE.........................................................................................................1

INTRODUCTION AND BACKGROUND..............................................................1

1.1 Background to the Study..............................................................................1

1.2 Statement of the Problem..............................................................................4

1.3 Objectives.......................................................................................................5

1.3.1 Main Objective................................................................................................5

1.3.2 Specific Objectives..........................................................................................5

1.4 Research Questions........................................................................................5

1.5 Significance of the Study...............................................................................6

1.6 Scope of the Study..........................................................................................6

1.7 Organization of the Study.............................................................................6

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CHAPTER TWO........................................................................................................8

LITERATURE REVIEW..........................................................................................8

2.1 Introduction...................................................................................................8

2.2 Theoretical Framework................................................................................8

2.2.1 Tax Morale Theory........................................................................................8

2.2.2 Technology Acceptance Model.....................................................................9

2.3 Empirical Study...........................................................................................13

2.3.1 Quality of System on Tax Compliance..........................................................13

2.3.2 Technology Literacy on Tax Compliance.....................................................15

2.3.3 Technology Security Concerns on Tax Compliance.....................................16

2.3.4 Tax compliance of Small and Medium Enterprises.......................................17

2.4 Theoretical Contribution............................................................................19

2.5 Conceptual Framework..............................................................................21

2.6 Research Hypotheses Formulation............................................................22

CHAPTER THREE.................................................................................................23

RESEARCH METHODOLOGY............................................................................23

3.1 Introduction.................................................................................................23

3.2 Research Approach.....................................................................................23

3.3 Research Paradigm......................................................................................23

3.3.1 Research Design............................................................................................23

3.3.2 Area of the Study...........................................................................................24

3.3.3 Study Population............................................................................................24

3.4 Sampling Design...........................................................................................24

3.4.1 Units of Analysis...........................................................................................24

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3.4.2 Sampling Procedure.......................................................................................25

3.4.3 Sample Size...................................................................................................25

3.5 Data Collection Instruments.......................................................................26

3.6 Data Analysis................................................................................................26

3.7 Validity and Reliability of the Study.........................................................27

3.7.1 Validity of Research Instrument................................................................27

3.8 Ethical Considerations................................................................................28

CHAPTER FOUR....................................................................................................30

DATA PRESENTATION, ANALYSIS AND DISCUSSION...............................30

4.1 Introduction.................................................................................................30

4.2 Respondents' Demographic Information..................................................30

4.2.1 Type of Business or Job.................................................................................30

4.2.2 Number of Employee in a Business..............................................................31

4.2.3 Capital Investment in a Business...................................................................32

4.2.4 Working Experience......................................................................................32

4.2.5 Knowledge in a Business or Taxation...........................................................33

4.2.6 Computer Knowledge....................................................................................34

4.3 Technological Factors on Tax Compliance among SMEs in Tanzania. .34

4.3.1 Effect of the Technology Literacy on Tax Compliance among

SMEs in Tanzania..........................................................................................38

4.3.2 Effect of Security Concerns on Tax Compliance among SMEs in

Tanzania.........................................................................................................40

4.3.3 Effect of System Quality on Tax Compliance among SMEs in

Tanzania.........................................................................................................41
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CHAPTER FIVE......................................................................................................44

DISCUSSION OF THE FINDINGS.......................................................................44

5.1 Introduction.................................................................................................44

5.2 Impact of Technology Literacy on Tax Compliance................................44

5.3 Impact of Taxation System Quality on Tax Compliance.........................47

5.4 Impact of Technology Security Concerns on Tax Compliance...............48

CHAPTER SIX.........................................................................................................50

SUMMARY, CONCLUSIONS AND RECOMMENDATIONS..........................50

6.1 Summary......................................................................................................50

6.2 Conclusions...................................................................................................51

6.3 Recommendations........................................................................................52

6.4 Areas for Further Studies...........................................................................52

REFERENCES.........................................................................................................53

APPENDICES..........................................................................................................66
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LIST OF TABLES

Table 4.1: Business or Job....................................................................................... 30

Table 4.2: Number of Employees in a Business.....................................................31

Table 4.3: Capital Investment in a Business.......................................................... 32

Table 4.4: Working Experience.............................................................................. 33

Table 4.5: Business or Taxation Knowledge..........................................................33

Table 4.6: Computer Knowledge............................................................................ 34

Table 4.7: Correlations............................................................................................ 35

Table 4.8: ANOVA................................................................................................... 37

Table 4.9: Model Summary..................................................................................... 37

Table 4.10: Coefficients............................................................................................. 38

Table 4.11: Technology Literacy.............................................................................39

Table 4.12: Security Concern..................................................................................40

Table 4.13: Quality of System................................................................................. 42

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LIST OF FIGURES

Figure 2.1: Technology Acceptance Model............................................................10

Figure 2.2: Conceptual Framework........................................................................21

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LIST OF ABBREVIATIONS

CULAS Custom Application Online System (CULAS)

e- Filing Electronic Filling

EFD Electronic Fiscal Devices

ESCAP Economic and Social Commission for Asia and the Pacific

ETR Electronic Tax Registers

ICT Information and Communication Technology

IFC International Finance Corporation

ISO International Organization for Standardization

iTax Income Taxation

MoF Ministry of Finance

OECD Organisation for Economic Co-operation and Development

PWC Price Water House

SME Small and Medium Enterprise

TAM Technology Acceptance Model

TRA Tanzania Revenue Authority

 CHAPTER ONE

INTRODUCTION AND BACKGROUND

This chapter introduces the study “the impact of technology in tax compliance

among Small and Medium Enterprises (SMEs) in Tanzania”. It is organized into the

following subsections: Introduction, background of the study, statement of the

problem, study objective, research question, and significance of the study.

1.1 Background to the Study

Taxation is the known practical source of public finance in many economies, besides

other sources like non-tax revenue such as user-fees and licenses charged for

services rendered by government department and agencies and foreign aids (Tresch,

2014). The fundamental purpose of taxation is to raise revenue effectively through

measures that suit each country’s circumstances and administrative capacity.

Tanzania is mostly supported by taxation as it provides a stable flow of revenue to

finance various developments like education sector, health, and infrastructures.

Tanzania government was imposing taxation with the aim of not only to raise public

revenue but also to affect consumption, production and distribution with a view to

ensuring the social welfare of its citizens through the economic development of the

country.

In fulfilling the revenue function, a well-designed tax system should be efficient in

minimizing the distortionary impact on resource allocation, and equitable in its

impact on different groups in the society (Bolnick, 2004). One of the reform

measures adopted globally has been the incorporation of ICT in the tax system to

reduce administration costs, improve services and voluntary compliance by

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taxpayers (James et al., 2015). Tanzania government took various measures to

improve taxation system particularly in using technology such as Electronic Fiscal

Devices (EFDs), income Taxation (ITAX) system and Custom Application Online

System (CULAS) in improving the domestic revenue collection process (Ministry of

Finance of Tanzania-MoF, 2013).

For Minimization of revenue collection cost as TRA is aware of the fast moving

trends in technology including e-government and e-commerce. TRA is bracing itself

for that to enable it to accept electronic filing (e filing) and other forms of modern

business conduct (Obert et al., 2018). Moreover, TRA has prepared and is

implementing an ICT strategy that will guide TRA in embracing the technology

trends. TRA has established its own website where all information regarding its

operations is posted (Tanzania Revenue Authority, 2018).

In order to reduce the cost of tax collection to both TRA and the taxpayers, TRA is

implementing a system of collecting taxes through commercial banks since July

2004. To continuously simplify this process, as this is one of the main obligations of

the TRA, efforts have also been made to reach out to businesses that need help to file

their tax returns. For example, to assist trading companies complete their income tax

returns, an online tax calculator was made available on TRA website (Tanzania

Revenue Authority, 2018).

The use of technology is one of the mechanism tax authorities can be proud of since

it allows taxpayers to file returns and pay on time and it can assist many SMEs in tax

compliance (Nkundabanyanga et al., 2017). Musyoka, (2019), urged that filing their
 3

enterprises’ tax returns through iTax had reduced the enterprises’ money and time

related costs, such it made easy for their businesses to make tax remittances

accurately, conveniently and on time. In additional the utilisation of ICT impacts on

tax administration by simplification of the process; an audit and decision-making

tool; impacts taxpayer perceptions and fairness towards compliance; and serves as an

information sharing tool with other tax agencies (Kgonare, 2017).

Apart from various benefits of using technology in taxation the statistics show that a

large group of eligible taxpayers is yet to be reached in Tanzania specifically SMEs

(MoF, 2013). Various reasons caused the failure to reach all taxpayer especially

SMEs while using technology as improvements of domestic revenue collection

process. Such obstacles include access to a computer, the tax software, a reliable

internet connection and the knowledge to utilize like the electronic filing (Hussein et

al., 2010). Another challenge is the quality of the system used in taxation such as the

issue of comprehensive online help menus and navigation of the e filing site (Lai and

Choong, 2010). Moreover, technological security concern is also a challenge to

SMEs to adopt and use tax system, this included standards, data integration, legacy

maintenance, privacy and security (Razak, 2009).

However, some of SMEs are facing challenges on tax compliance due to the

problems on taxation law and procedures. Odongo (2014) noted that a tax

compliance level among the SMEs is very low due to several factors that including

poor book keeping, low sales turn over, and frequent ownership changes of SMEs,

large proportion of SMEs who are ignorant of taxation processes and computations,

as well as lack of comprehensive sensitization programmes.

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1.2 Statement of the Problem

Small and Medium Enterprises (SMEs) play an important economic role in many

countries. In Tanzania more than 95% of businesses are made of small and medium

scale business enterprises, which contribute 35% of the Tanzanians gross domestic

product and employ approximately 40% of the total workforce in the country

(Kashalaba, 2017). To ensure effectiveness in tax administration and reach all

taxpayers, the Tanzania government performed various reform activities specifically

through use of technology although statistics show improvements in term of tax

collection, a large group of eligible taxpayers is yet to be reached (TRA, 2018).

Nsato, (2018) argued that their significance SMEs is confronted with major taxation

challenges, which hinder the compliance with tax rules and procedures due to

introduction of new technology. SMEs practice towards the use of EFD machines in

Tanzania is not so effective since out of 100 SMEs’ businesses premises only one

provided EFDs receipt free of demand by the customer (Kamote and Ngowi, 2015).

Lack of knowledge on effective utilization of new technology is among the factors

affecting SMEs on tax compliance in developing countries like Tanzania (Lumumba

and Migwi, 2010).

Security concerns over technology usage also affect SMEs on tax compliance.

Geetha and Sekar (2012), highlight that the taxpayers using the online tax system are

worried on whether third parties can access their personal tax information without

their knowledge or permission due to lack of promise to complete their transaction

securely and maintain the privacy of their personal information. Furthermore, quality

of system used in tax system also is the challenge on tax compliance. This can
 5

influence SMEs fail to voluntary using technology in tax compliance. Nakiwala

(2010), argued that the inability of the system to handle huge information during the

peak hours may change the perception of the users that the system in unreliable. This

may lead customers opt to utilize the manual filing due to the perception that the

system is always unreliable (Mugo, 2013). The challenges mentioned can affect

voluntary use of technology on tax compliance among SMEs in Tanzania.

1.3 Objectives

1.3.1 Main Objective

The main objective of the study is to assess the impact of technology in tax

compliance among small and medium enterprises in Tanzania.

1.3.2 Specific Objectives

The specific objectives of the study are as follows;

i. To examine the effect of technology literacy on tax compliance among small

and medium enterprises in Tanzania.

ii. To examine the effect of system security concerns on tax compliance among

small and medium enterprises in Tanzania

iii. To examine the effect of system quality on tax compliance among small and

medium enterprises in Tanzania

1.4 Research Questions

The following research questions have been formulated and lead the analysis of this

study.

i. What is the effect of technology literacy on tax compliance among small and

medium enterprises in Tanzania?

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ii. What is the effect of security concerns on tax compliance among small and

medium enterprises in Tanzania?

iii. What is the effect of system quality on tax compliance among small and

medium enterprises in Tanzania?

1.5 Significance of the Study

This study helped uncover the impact of technology which hinders Small and

Medium Enterprises (SMEs) in Tanzania on tax compliance. The study explored

various important issues which affect SME in Tanzania on tax compliance such as

technology literacy; security and system quality. The study further highlighted the

importance of technology on tax compliance to SMEs and also for the Tanzania

national in general.

1.6 Scope of the Study

The study covered the population of Ilala and Temeke district in Dar es Salaam

region, which was involved in SMEs. The population was registered for a business

and located at Kariakoo International Market. Due to time and budget constraints the

study involved SME’s dealing with wholesale of electronics devices and motorcycle

only.

1.7 Organization of the Study

The study organized into six (6) chapters: Chapter One provides an introduction and

background this include the background of the study, statement of the problem,

research objectives and discusses the potential significance of the research effort.
 7

Following this introductory chapter, Chapter two is reviews literature; this chapter

provides a detailed discussion on the Technology as well as tax compliance with it’s

their theories. Moreover, the main research frameworks (Theoretical and

Conceptual) are presented in an attempt to explore the key contributions and to

identify the gaps that motivated the study.

Chapter three is devoted to the research methodology. The chapter provides a most

detailed discussion on the research setting such the research design, the process of

data collection, the development of the questionnaire instrument, the sampling

frame, the survey implementation, the response rate attained, the sample

characteristics, the reliability and validity evaluation of the measures utilized and the

statistical techniques employed to analysis the research questions.

Chapter four is dedicated to data presentation and analysis. In this regard, it

discusses the sample demographics, and the factors affecting Tax compliance among

SMEs in Tanzania. Chapter five is include the discussion of the findings, which

presented in previous chapter. This chapter explores and discusses in detail the

results of multiple regression analyses that were performed to determine the effect of

each factor in tax compliance in this study. Finally, Chapter six is the summaries of

this research, conclusion and recommendations; also it includes the area for further

study.
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CHAPTER TWO

LITERATURE REVIEW

2.1 Introduction

This chapter presents literature review and theoretical review related to the study of

the impact of technology in tax compliance among SMEs in Tanzania. The chapter is

organized into the following sub-sections: Introduction, Theories framework,

empirical reviews and Conceptual Framework.

2.2 Theoretical Framework

The study of impact of technology on tax compliance among SMEs in Tanzania was

guided by two key theories, which are Tax Morale Theory and Technology

Acceptance model (TAM).

2.2.1 Tax Morale Theory

The concept of tax morale was introduced in 1960s by Cologne school of tax

psychology (Schmӧlders, 1970) and it became a central issue on tax compliance.

According to Torgler, (2012), the Tax morale is defined most often as the intrinsic

motivation to pay taxes. Also, Luttmer and Singhal (2014) define tax morale as the

totality of non-pecuniary motivations and factors for tax compliance which fall

outside the expected utility maximisation. The tax morale represents a significant

factor that affects tax compliance; therefore tax morale plays a sizeable role in

explaining tax compliance decisions (Luttmer and Singhal, 2014).

According to Dwenger et al., (2016) tax enforcement is limited or non-existent and

where the results show that about 20 percent of the individuals paid taxes despite the
 9

lack of enforcement. Although a high level of tax morality (attitude) does not

automatically result in a high level of tax compliance (behaviour). This noted that

lower levels of tax morale are associated with higher levels of tax evasion/lower

levels of tax compliance, higher levels of shadow economy, higher participation in

undeclared work and higher participation in underreporting wages ((Windebank and

Horodnic, 2017; Stark and Kirchler, 2017; Williams and Horodnic, 2017a).

According to Vythelingum et al., (2017) tax morale is improved if the government

and the tax system are perceived by the citizens as being fair. Tax morale increases

where there is a closer relationship between the government and citizens, expressed

as legal rights/democracy or local autonomy (Horodnic, 2016). However according

to Sá et al., (2015), some time individual has a negative effect on tax morale. This

might the individuals share rather negative experiences related to the public

authorities that, in turn, reduce vertical trust and therefore the tax morale of the

entire group. Similarly, when discussing with friends and family, if some particular

honest individuals become aware that other peers cheats in respect to their tax due,

their own tax morale is reduced due to a reduced horizontal trust.

2.2.2 Technology Acceptance Model

Technology acceptance model (TAM) was deployed to determine theoretical

contribution of this study. This due to the fact that TAM had capacity to explain and

predict user behaviour on information technology, by offering the functions, which

can help SME on tax compliance. TAM was originally proposed by Davis in 1986 to

help explain and predict user behaviour on information technology, and it developed

based on the theory of reasoned Action. The purpose of this model is to predict the
 10

acceptability of a tool and to identify the modifications which must be brought to the

system in order to make it acceptable to users. TAM suggests that the acceptability

of an information system is determined by two main factors which is perceived

usefulness and perceived ease of use as shown in Figure 2.1.

Figure 2.1: Technology Acceptance Model

Source: Davis, (1986)

TAM has been widely used model to help understand and explain user behaviour in

an information system. TAM was emphasized the role of technology in different

areas especially taxation. The two main factors in TAM; perceived usefulness and

perceived ease of use of technology are the key features which can highlight the role

technology on tax compliance; hence it will be able to guide the study to reveal the

impact of technology among SMEs on tax compliance.

According to the World Bank Group and PwC (2018), urged that the use of

technology, by business and government, in tax compliance is driving continued

simplification and reduction in the burden of tax compliance on businesses.

Globally, the tax environment is changing rapidly, and an electronic tax system is a

modern way of tax authorities interacting with taxpayers (Muturi and Kiarie, 2015).
 11

The modern way introduced in tax (automation) help to minimizes direct contacts

between tax collection officers and traders or their agents and hence leads to a

reduction of corruption. Further benefits achieved through customs automation

include improved reporting, control of file transfer, automation reconciliation of tax

returns declarations and compliance testing of bank files. Paperless declarations and

customs automation save time and make it easier to focus on inspecting high-risk

consignments. The submission of tax returns declarations on-line has in some cases

made it possible to reduce the associated fees, in other cases it eliminates the

obligatory contracting of customs agents.

According to World Development Report (2016) technology is transforming the

ways governments deliver services to and interact with citizens across various

sectors, from public financial management (Tax administration) to social programs

to elections and many others. The mentioned benefits of technology are indicated the

influence of technology on tax compliance, since tax compliance is defined as the

supply of accurate and timely lodgment of income tax return together with the

required payments whenever due (Auyat, 2013).

According to Simuyu and Jagongo (2019) urged that there is a significant

relationship between the perception towards online tax filing in terms of ease and

simple to file and also the system being secure, this improves tax compliance levels.

Also Muturi and Kiarie (2015), suggested that there is a strong positive correlation

between adoption of e-tax system through online tax registration, online tax return

filing, online tax remittance and tax compliance among small taxpayers. This

implied that government would be able to raise more revenues if small business
 12

enterprise taxpayers adopt the electronic tax system. This means that the usefulness

and ease of use of technology (TAM factors) have shown greater influence of

technology on tax compliance.

Despite sizeable changes in the global average results, many economies, particularly

in the lower income range (SMEs), have been slower to take full advantage of the

benefits of technology (World Bank Group and PWC, 2018), while small business

enterprises (SMEs) play a crucial role in encouraging mass economic growth and

reasonable sustainable development. Small business enterprises are viewed as a key

driver of economic and social development in the African context. They represent a

large number of businesses in a country, generate much wealth, provide employment

and are widely considered to be vital to a country’s competitiveness in terms of

revenue generation (Wangui et al., 2015).

The slower taking full advantage of the benefits of technology it affect SME

specifically in Tanzania to accomplish dimensions of tax compliance (timely filing

and reporting of required tax information, the correct self-assessment of taxes owed,

and the timely payment). According to Arviniwisudawaty, et al., (2018) urged that

compliance with taxpayers is influenced by several factors including the quality of

the system, the quality of information and the quality of tax services. A system can

make attraction to taxpayers if the system is good, easy to understand and also able

to facilitate taxpayers in carrying out their obligations in reporting taxes. Therefore,

the study was considered three (3) key issues to measure the impact of technology on

tax compliance among SMEs in Tanzania, which are technology literacy, system

quality and security concern.

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2.3 Empirical Study

2.3.1 Quality of System on Tax Compliance

According to Arviniwisudawaty, et al., (2018), urged that the quality of the system

means the quality of the combination of hardware and software in the information

system. If the information user believes that the quality of the system in producing

information is good, then the user will feel satisfaction in using the information

system.

Also, Khairrunnisa, et al., (2017), suggested that the quality of information systems

affects taxpayer compliance. This implies that the quality of the system has a

significant effect on taxpayer compliance (Arvini, et al., (2018). System quality in

tax compliance is the system which can provides reliable a variety of tax services.

The system that is easy to use, secure, and dependable, provides easy payment mode,

provides a variety of services and user-friendly is boosts voluntary tax compliance

(Haryani et al., 2015).

According to Simuyu and Jagongo (2019) indicate that there is a significant

relationship between the perception towards online tax filing in terms of ease and

simple to file and the system being secure, which is improves tax compliance levels.

However, some of SMEs are not like to use technology which, lead to low tax

compliances this due to poor system quality. According to Maisiba and Atambo

(2016) found that taxpayers in Kenya felt uncomfortable using an electronic tax

system as compared to the old manual system. Taxpayers who evaluate electronic

filing system as not easy to use do not adopt it which affects tax compliance

(Maisiba and Atambo, 2016).

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Moreover, the stability of the system to handle the high traffic during the peak times

is the determinant of system quality in taxation. The inability of the system to handle

huge information during the peak hours and may change the perception of the users

that the system in unreliable (Nakiwala, 2010), this may cause the customers opt to

utilize the manual filing due to the perception that the system is always unreliable

(Mugo, 2013). Ondara et al., (2016) noted that the system hang ups led to delay in

submission of tax returns submission. This is attributable to the fact that such delays

leads to taxpayers postponing on the scheduled times to do their tax returns, this

system hang ups lead to unwillingness to file returns, due to the frustration

experienced when there are incidences of system challenges.

Also, system hang ups led to inability to file returns without assistance from third

parties. This is in view of the time expenditure making SMEs to outsource the

services to specialized cyber cafes. In relations to system hang ups leading to

incurrence of costs to pay third parties to file on their behalf. Most of the third party

assistance is sought from the cyber attendants who operate on commercial basis.

This challenge of the system hang ups led to compromise of information submitted.

This can be attributed to passing of the information to the third parties to assist in

filing of returns

Also, the system quality determined by the quality of the services provided to the

users (taxpayers). According to Maisiba and Atambo (2016) argue that the e-tax

system improves tax compliance, as it facilitates faster accessibility to tax services

without a physical visit to the tax authority premises. This enable the timely filing

and reporting of required tax information, the correct self-assessment of taxes owed
 15

and the timely payment of those taxes. According to OECD (2016) urged that the

quality of information had various benefits in tax compliance such as shortens the

time taken to extract data and information on revenue (example processing returns

and related information from taxpayers), shortens the time taken to entering tax

return data into a database, shortens the time taken to matching returns against filing

requirements, shortens the time taken to processing tax payments and matching them

against assessments, and issuing assessments and refunds. Hence it is simplifying tax

processes and makes it easy for taxpayers to comply (OECD, 2016).

2.3.2 Technology Literacy on Tax Compliance

Taxpayer education will provide necessary tax knowledge to the SMEs which would

enable them to comply with the tax matter and change the perceptions and

attitudes towards tax compliance by creating more positive attitudes (Kelvin,

2017). Under technology literacy are some issues shown greater effects on tax

compliance such the proficiency of internet usage due to the fact that the online tax

returned is internet based hence proficiency of internet usage is a key requirement.

Also, basic computer trouble shooting skills, the ability to use self-help menus on

itax platform as well as ability to determine successful application affects the tax

compliance (Ondara et al., 2016). According to Zaidi et al. (2017) found that

taxpayers with computer skills will find it easy to adopt an electronic tax system than

those without. The user of the electronic tax system must find it pleasant interacting

with the electronic tax system, so that the technology skill to SMEs is very important

when they evaluates the e-tax system as favourable, for instance as time saving,

improving performance in preparing tax returns, making work easier and being
 16

secure the person develops a positive attitude towards e-tax system and this

translates into tax compliance (Night et al., 2019).

Low educational level among employees find it difficult to use EFD devices due to

lack know how on how best to use them. Moreover, employees perceived negatively

the use of fiscal electronic devices because they are not aware of the method and

some are just resistant to change that is given all the resources they will reject to use

the advanced method (Nyasha et al., 2013). Lack of the ability to use the e filing

system quickly and efficiently or lack of understanding the type of information

required by the online tax filing system forces taxpayers to engage third parties, this

could be the cybercafé attendants and would charge premium for such services

(Odongo, 2014).

Tax authorities need to focus on increasing electronic tax system usage and ensure

that there is further training of taxpayers on the importance of tax compliance as well

(Night and Bananuka, 2018). One key example is education programme, which is

customized to suit the needs of each trade or industry association. Seminars and

workshops are conducted to educate taxpayers on existing tax rules and explain new

tax changes. Seminars are targeted to newly incorporated companies and SMEs that

are not represented by tax agents. Education is provided to companies on basic tax

principles and other essential information to help them comply with tax rules

(Gitaru, 2017).

2.3.3 Technology Security Concerns on Tax Compliance

Security issues are one of the major concerns in the use technology in taxation.

(Ondara et al., 2016) urged that they were uncomfortable revealing business
 17

information to cyber attendants for assistance in tax filing due to the fact the

information that would normally presented gives an overview of the financial

performance of their businesses. On the other hand, the information revealed to third

parties during tax returns may place their businesses at security risk. This due to the

fact that the information presented discussed on the financial performance of their

businesses which could be revealed by third parties to criminals.

SMEs feared that the information presented to third parties during online tax filing

may be revealed to their competitors since their data will not be handled

professionally by cyber attendants and consequently information given to third part.

This may lead the taxpayer opt to fill the manual tax returns in a bid to protect the

privacy of his data (Ssetuba, 2012). According to Mandola (2013) argues that a

feeling of increased anxiety and stress due to lack of experience or comfort with

using technology or feeling threatened by technology could prevent a customer being

inclined to adopt the e filing system.

Concerns over security issues or perceived risks on the usage of the online filing

services inhabit its adoption. According to Al-Debei et al. (2015), proposed that

consumer attitudes towards online system are positively and directly affected by trust

and perceived website reputation, and this implies that if taxpayers perceive or

evaluate the e-tax system to be secure, they will trust it and adopt it.

2.3.4 Tax compliance of Small and Medium Enterprises

Tax compliance is the most neutral term available to describe the willingness of

taxpayers to pay their taxes (Besley et al., 2014). Tax compliance has become an
 18

important subject for individuals and firm’s taxation in both developed and

developing countries and it emphasizes a taxpayer’s responsibility to report income

and determines tax liability (Inasius, 2019). Since tax is considered as a primary

source of revenue and crucial instrument of funding most government expenditures

around the globe (Umar et al., 2017), unfortunately, tax non-compliance among

SMEs is a continuing problem which prevents various governments from generating

sufficient revenue, thus adversely affecting the financing of public activities

(Kirchler, 2007).

According to Statistical from MPIC (2018), revealed that the contribution of income

tax revenues by SMEs to the government’s total revenue still remains relatively low,

disappointing and problematic to the Yemeni government and this is due to low tax

compliance, this lead the Yemen loses approximately 4.7 billion dollars annually

from unpaid taxes (AlFassel, 2014). In Particular, the contribution of SMEs in

income tax is still minimal and comparatively small in terms of the total Yemeni tax

revenue (Al-Ttaffi, 2017).

The emphasis is influenced or driven in relation to the SMEs income tax potentials

in the generation of high-income tax revenue in comparison with other sector taxes.

This low compliance behaviour among the SMEs leads to a significant loss in

government tax revenues, particular in developing country like Tanzania. Low tax

compliance of SMEs caused by variety of factors that such as reporting

noncompliance factor. According to Tanzania Revenue Authority (2018), timely

filling and reporting of return, this involves tax payers’ declaration of all his

properties to the tax regulatory authority.

 19

The Reporting noncompliance can occur by either underreporting income or

overstating offsets to income (i.e exemptions, adjustments, deductions and other

credits such as refunds). Income Tax Act of Tanzania requires every taxpayer to file

tax returns at the end of each month, quarterly returns at the end of each quarter and

annual returns once each year depending on accounting period. Failure to pay tax,

failure to report tax returns, underestimating of income for tax purpose, failure to

keep documents as per TRA tax laws and submission of false statements to TRA

attracts penalties and interests.

Another factor is timely payment of tax dues noncompliance, according to Income

Tax Act of Tanzania; provide an option to taxpayer to pay his tax liability up to four

equal instalments per year. However, TRA records shows that, there is still large

potential number of tax payer who do not comply to tax laws in term of corporate

tax, individual income tax and withholding taxes (Tanzania Revenue Authority,

2015). Furthermore, KIpkoech and Joel (2016) point out that self‐employed have

more possibilities to avoid taxes than employed taxpayers. However, self‐employed

taxpayers have more opportunities for tax evasion and these opportunities might

further increase with the number of different income sources (Agbi, 2014). Hence, in

tax compliance decisions the level of income might interact with its source

(KIpkoech and Joel, 2016).

2.4 Theoretical Contribution

There are various benefits of using technology on tax compliance especially for

SMEs in Tanzania. According to Nyasha et al., (2013), point out the benefit of

automation tax system include a reduction of fraud, remote access to information,

 20

improve collection of statistics, uniform application of tax legislation, minimizing

direct contacts between tax collection officers and traders or their agents (reduction

of corruption).

Further benefits of technology in taxation include improved reporting, control of file

transfer, automation reconciliation of tax returns declarations, save time, easier to

focus on inspecting high-risk consignments and compliance testing of bank files.

Apart from advantages and benefits of technology still some of SME are reluctant to

adopt and use it, which leads to a low level of compliance among SMEs. According

to Ndemanyisho (2014) revealed that in Tanzania the implementation of ISO 15489-

1 was constrained by some challenges such as unqualified records officials, poor

linkage between department of ICT and records management unit.

Also, Weru et al., (2013) reported the similar problem at Kenya, they revealed that

when the ETR machines were introduced by Kenya Revenue Authority most of the

businessmen and service providers rejected them. This was happened due to various

reasons such as lack of skills of using technology, security concern as well as

worried about quality of the system used in tax system. These challenges caused

among SMEs failed to comply with tax law and regulations, which can influence tax

eversion (Non tax compliance) especially for SMEs in Tanzania.

Therefore, this study proposed to explore the impact of technology on tax

compliance among SMEs in Tanzania. Such issues were considered is technology

literacy, security concern and quality of the system on tax compliance in Tanzania,

which is related to two main factors in TAM; perceived usefulness and perceived
 21

ease of use of technology.

2.5 Conceptual Framework

This study was assessed the impact of technology on tax compliance hence it was

established relationship of two (2) major variables which is tax compliance and

technology which conceptualized as the dependent variable and independent variable

respectively. The independent variable technology is characterized based on their

importance on attained tax compliance dimension (timely and correct filling,

reporting and payment) include technology literacy, quality of the system and

security concern as shown in figure 2.2

Independent variables Dependent variable

Technology Literacy

System Quality
Tax Compliance

Security Concern

Figure 2.2: Conceptual Framework

The study conceptual framework in Figure 2.3 above represent the relationship

between technology and tax compliance, which constituted three (3) independent

variables; Technology literacy, Quality of the System and Security Concern and the

tax compliance as a dependent variable. The independent variables will explore

various technological issues which associated to TAM two main factors of perceived

usefulness and perceived ease of use of technology such as faster accessibility to tax
 22

services, easy to use, security, reliability, provision of a variety services and user-

friendly.

According to Haryani et al., (2015), argued that the system which is easy to use,

secure and reliable, provide easy payment mode, provides a variety of services and

user-friendly is boosts voluntary tax compliance. Furthermore, dependent variable

tax compliance include issues such as lodging the income tax return form (filling),

stating all the taxable income truthfully (reporting), paying all the tax obligations

within the specified period without authority follow-up or actions (payment) and

increase in tax collection and payment (Musimenta et al., 2017).

2.6 Research Hypotheses Formulation

Since the study intended to assess the impact of technology on tax compliance

among SMEs in three areas which is Technology literacy, Quality of the System and

Security Concern, therefore the following three (3) research hypotheses were guided

the study;

i. H1: Technology literacy has no positive effect on tax compliance among

small and medium enterprises in Tanzania

ii. H2: Security concerns has no positive effect on tax compliance among small

and medium enterprises in Tanzania

iii. H3: Quality of System of tax system has no positive effect on tax compliance

among small and medium enterprises in Tanzania.

 23

CHAPTER THREE

RESEARCH METHODOLOGY

3.1 Introduction

This chapter presents research methods used in the study. The chapter is organized

into the following sub-sections; research approach, research design, population of

the study, sample and sampling techniques, instruments for data collection, data

analysis, validity and reliability of study as well as ethical considerations.

3.2 Research Approach

According to Kothari (2008), research methodology is an approach a researcher uses

to investigate the study based on the philosophical basis on which the research is

found. The researcher employed applied quantitative approach in order to determine

the impact of technology in tax compliance among small and medium enterprises in

Tanzania. Factors studied include technology literacy, tax system quality and

security concern.

3.3 Research Paradigm

3.3.1 Research Design

Research design refers to the explanation of the method adopted in carrying out of

the research and is thus a plan or structure of any aspect of the research procedure

(Ada, 2009). The descriptive research technique will be used in the study. Since, a

descriptive study enables the current description of the phenomena being studied

(Simiyu, 2013). According to Chepkangor (2012), suggested that descriptive case

studies are used to describe an event or process in its natural ambit and the main

objectives is to answer how, who and what questions. This research technique was
 24

used in this study since the study is interested to determine the impact of technology

in tax compliance among small and medium enterprises in Tanzania as a case study.

3.3.2 Area of the Study

The study was conducted at Ilala Municipal in Dar es Salaam region. Ilala Municipal

is among the 5 municipalities found in Dar essalaam region, other municipals are;

Kinondoni, Temeke, Ubungo, and Kigamboni. Moreover, Ilala Municipal was

chosen because the area is where Kariakoo International market found at Dar es

Salaam region.

3.3.3 Study Population

Study population refers to any group of individuals who have one or more

characteristics in common that is of interest to the researcher (Best and Khan, 2003).

The target population in this study was SMEs dealing with wholesale of electronics

device and motorcycles at Kariakoo International market and Tanzania Revenue

Authority (TRA) officers.

3.4 Sampling Design

3.4.1 Units of Analysis

The unit of analysis in business studies may be divisions, companies, projects,

systems, individuals, dyads, groups, plants, etc. (Flynn et al., 1990). In cases where

the level of reference is higher or lower from the unit of analysis the researcher will

face the “cross-level inference problem” (Babbie, 1992), i.e. collecting data at one

level and interpreting the result at a different level (Dansereau & Markham, 1997).

This introduces bias and it can be avoided by choosing the most knowledgeable
 25

person about the construct of interest (Huber and Power, 1985). This study the

following measures were applied to avoid Common Method Variance: by identifying

the key informant, recognition of key informant’s awareness in subject of the study

and use of pre-tested questions. Hence SMEs located at Kariakoo International

Market and TRA officers located at Ilala municipal were in our sample, since

considered to have the knowledge and interest to provide meaningful responses

regarding the effect of technology in tax compliance among SMEs in Tanzania.

3.4.2 Sampling Procedure

Sampling is the process of selecting a number of individuals for a study in such a

way that the individuals selected represent the large group from which are to be

selected (Mugenda and Mugenda (1999). The study was applied random sampling

(probability) techniques to select respondents who are SMEs and officers from TRA

located at Ilala municipal. According to David (2011), random sampling is the

process that guarantees all the possible samples taken from the population have the

same probability of being chosen, this is, all the elements of the population have the

same probability of being chosen to belong to the sample. The study was selected

any SMEs as long as dealing with sales of electronics devices or motorcycle and

located at Kaiakoo International Market.

3.4.3 Sample Size

This study was employed Kothari’s (2004) formula to calculate the size of the

sample and the formulas is given by . Whereby, n = number of

sample, N= Population and e is sampling error. The sample size of the study were

144 respondents which come from targeted population of 231 SMEs from Kariakoo
 26

International Market and Officers form TRA at Ilala municipal in Dar es Salaam.

The formula to scientifically derive the sample from the target population is

illustrated hereunder.

Where:

N = 231

e = 5% under 95% confidence level

Sample size = 231/1 + 231 * (0.5%)2

Sample size = 144

3.5 Data Collection Instruments

Structured questionnaire is the one use of written down items to which the

respondents will individually respond in writing (Kothari, 2004). This study used a

structured questionnaire to collect primary data from SMEs and TRA staff. The

questionnaire was used to describe an existing phenomenon by ask individuals about

the perception, attitudes and behaviour or values (Kipkenei, 2012). The study

employed questionnaires because they have the possibility of using distant

respondents. The use of structured questionnaires enabled the researcher to obtained

substantial quantitative data that provided appropriate representation of analysis

results. The questionnaires was distributed physical to respondents and it were

collected after 3 three days.

3.6 Data Analysis

Data analysis refers to the examining what has been collected in survey or
 27

experience and making deduction (Kombo and Trompo, 2006). The quantitative

data, which was from respondents, were analysed using descriptive statistical

packages (SPSS) where frequencies, Percentages, and mean were obtained and

regression analysis was run to establish the statistical significance of the findings.

Moreover, the preliminary analyses were performed; reliability analysis performed

to check internal consistence of data while correlation analysis performed to

determine the relationship between variables (independent and dependent) in the

study. The IBM SPSS software version 25 was used to analysis the data from

structured questionnaire and the results were presented in tables.

3.7 Validity and Reliability of the Study

3.7.1 Validity of Research Instrument

According to Kothari (2004), the validity defined as the degree to which an

instrument measures what it is supposed to measure. Validity of instruments is the

quality of gathering instruments or procedures, which measures what they are

supposed to measure. This study used various measures to ensure the validity of the

study such as conducted pre-test (pilot) and shared each step of the study with

experienced experts. The researcher conducted pre-test study at Makumbusho

market at Kinondoni Municipal in Dar es Salaam, which helped to determine the

effectiveness of data collection instruments. Furthermore, results and each step were

shared with supervisor for comments and recommendation on the quality of

instruments.

3.7.2 Reliability of Research Instrument

Reliability is the extent to which a measurement procedure obtains the same results
 28

on repeated trials to obtain similar results by measuring an object, trait or construct

with an independent but comparable measurers (Brown, 2006). According to Brown

(2006) there are several devices for checking reliability in scales and tests such as re-

test, alternative forms methods or split half method. The study’s instrument was

ascertained by pre- testing of the instruments before going to the actual study. The

study performed reliability analysis and the Cronobach alpha values were obtained

from the data as shown in Table 3.1.

Table 3.1: Reliability Statistics

SN Items Cronbach's Alpha N of Items
1 Technology Literacy .908 10
2 Security concern .849 9
3 Quality of system .893 9
4 Tax compliance level .909 10
Source: Field Data, 2020

Results from table 3.1 shown that Technology Literacy had Cronbach's Alpha of

0.908 from 10 items where measures in this study. Security concern had Cronbach's

Alpha of 0.849 from 9 items, Quality of system had Cronbach's Alpha of 0.893 from

9 items and Tax compliance level had Cronbach's Alpha of 0.854 from 10 items.

Mugenda and Mugenda (2009), stated that a coefficient of 0.7 or more implies that

there is a high degree of reliability of data. Since all four (4) factors of this study had

Cronbach’s Alpha of great than 0.7, therefore this implies that variables provided

reliable results due to good internal consistence of the data.

3.8 Ethical Considerations

According to Cohen et al, (2007), adherence to confidentiality is not only a principle

but a necessary requirement to build and ensure safety and trust to respondents as
 29

well as giving freedom to respondents to open their minds to tell exactly what they

feel towards a certain question that need to respond. This study considered ethics

issues required by informed consent from the respondents before undertaking to

collected data from the field, provided clear explanation of objective of the research,

solicited only agreed information and used the information for stated purpose only

while maintaining high level of confidentiality on the information provided by

respondents.
 30

CHAPTER FOUR
DATA PRESENTATION, ANALYSIS AND DISCUSSION
4.1 Introduction

This part presents the findings of the study, analysis and discussion and it consists of

two main parts. The first part covers the general findings such as background or

demographic Information of the respondents and second part presents research

findings based on research specifics objectives.

4.2 Respondents' Demographic Information

This section presents information concerning respondents’ characteristics. The

information sought is based on type of Business or job, Number of employees in a

business, Capital investment in a business, working experience, Business or taxation

knowledge and Computer knowledge. All these helped the researcher to sort out the

Impact of Technology in Tax Compliance among Small and Medium Enterprises in

Tanzania.

4.2.1 Type of Business or Job

The study involved SME as well as TRA officers with the intention to get views

from all parties which were involved in taxation system as shown in Table 4.1.

Table 4.1: Business or Job

Business or job Frequency Percent
Sales electronics devices 58 40.3
Sales motorcycles 40 27.8
TRA officer 46 31.9
Total 144 100.0
Source: Field Data, 2020
 31

The results from Table 4.1 shows that 58 (40.3%) of respondents were dealing with

Sales of electronics devices, 46 (31.9%) of respondents were TRA officers and 40

(27.8%) of respondents were dealing with Sales of motorcycles. This implies that the

researcher managed to involve the intended respondent in representable proportional

which can provide clear picture on the impact of technology in tax compliance

among SME in Tanzania.

4.2.2 Number of Employee in a Business

Number of employees in a business is the one of criteria of determining the size of

business small, medium or large. The study involved all small, medium and large

business in term of number of employees as shown in Table 4.2.

Table 4.2: Number of Employees in a Business

Category Frequency Percent
1-49 employees 86 60.1
50-99 employees 18 12.6
100 and above employees 39 27.3
Total 143 100.0
Source: Field Data, 2020

The results from Table 4.2 show that 86 (60.1%) of respondents businesses had

employees from 1 to 49; 39 (27.3%) of respondents businesses had employees above

100 and 18 (12.6%) of respondents businesses had employees from 50 to 99.

According to the definition of SME (IFC, 2009), this implies that the study involved

all intended respondents who can provide necessary information on the impact of

technology in tax compliance among SME in Tanzania.

 32

4.2.3 Capital Investment in a Business

Capital investment in a business also is another criteria of determining the size of

business either small, medium or large. The study involved all small, medium and

large business in term of Capital investment in a business as shown in Table 4.3.

Table 4.3: Capital Investment in a Business

Capital investment Frequency Percent
Up to Tsh 5 million 56 39.2
Above Tsh 5 million to Tsh 200 million 40 28.0
Above Tsh 200 million to Tsh 800 million 8 5.6
Above Tsh 800 million 39 27.3
Total 143 100.0

The results from table 4.3 shows that 56 (39.2%) of respondents businesses had

capital investment of Up to Tsh 5 million, 40 (28.0%) of respondents businesses had

capital investment of Above Tsh 5 million to Tsh 200 million, 39 (27.3%) of

respondents businesses had capital investment of Above Tsh 800 million while 8

(5.6%) of respondents businesses had capital investment of Above Tsh 200 million

to Tsh. 800 million. This implies that the study involved small, medium and large

business (IFC, 2009), to obtained the views on the impact of technology in tax

compliance among SME in Tanzania.

4.2.4 Working Experience

Working experience helped to determine the length and the experience of particular

business regarding tax compliance. The study involved various business with

different experience in taxation as shown in table 4.4 The results from table 4.4 show

that 75 (52.1%) of respondents had working experience of less than 5 years, 41

(28.5%) of respondents working experience of 5 to 9 years, 16 (11.1%) of

 33

respondents had working experience of 10 to 15 years and 12 (8.3%) of respondents

had working experience of more than 15 years. This implies that most of the new

businesses face challenges on using technology in tax compliance in Tanzania.

Table 4.4: Working Experience

Year Frequency Percent
Less than 5 years 75 52.1
5 to 9 years 41 28.5
10 to 15 years 16 11.1
More than 15 years 12 8.3
Total 144 100.0
Source: Field Data, 2020

4.2.5 Knowledge in a Business or Taxation

The study also explores the knowledge in business or taxation among SME in

Tanzania as shown in Table 4.5.

Table 4.5: Business or Taxation Knowledge

Business Knowledge Frequency Valid Percent
Yes 102 71.3
No 41 28.7
Total 143 100.0
Source: Field Data, 2020

The results from table 4.5 show that 102 (71.3%) of respondents had business or

taxation knowledge while 41 (28.7%) of respondents had no knowledge either in

business or in taxation. This implies that most of the SME in Tanzania have

knowledge in business or taxation, which can help them to comply with tax

regulations.
 34

4.2.6 Computer Knowledge

Computer knowledge is useful in applying various technologies in business

especially in tax compliance. The study explored computer knowledge among SME

in Tanzania as shown in Table 4.6.

Table 4.6: Computer Knowledge

Computer knowledge Frequency Percent
Yes 113 79.0
No 30 21.0
Total 143 100.0
Source: Field Data, 2020

The results from table 4.6 show that 113 (79.0%) of respondents had computer

knowledge while 30 (21.0%) of respondents had no computer knowledge. This

implies that most of the SME in Tanzania are capable of using technology in their

business, which can help them comply with tax regulations.

4.3 Technological Factors on Tax Compliance among SMEs in Tanzania

Technology Literacy, Security concern and Quality of system are three (3)

technological factors which were considered in this study in order to determine the

impact of technology on tax compliance among SMEs in Tanzania. The regression

analysis where used to predict the impact of Technology Literacy, Security concern

and Quality of system on dependent variable tax compliance. Since regression

analysis was used to determine the effect, correlation analysis was performed first to

measures strength of relationship between Technology Literacy, Security concern

and Quality of system with Tax compliance level.

 35

i. Correlation Analysis

A correlation is a statistical device that measures the strength or degree of a

supposed linear association between two or more variables. Correlation analysis was

performed to measure strength of relationship association between tax compliance

level and Technology Literacy, Security concern and Quality of system as shown in

Table 4.7.

Table 4.7: Correlations

Technology Security Tax Quality
Literacy concern complianc of system
e level
Pearson Correlation 1 .090 .331** .232**
Technology
Sig. (2-tailed) .293 .000 .006
Literacy
N 137 137 137 137
Pearson Correlation .090 1 .138 .226**
Security
Sig. (2-tailed) .293 .107 .008
concern
N 137 137 137 137
**
Tax Pearson Correlation .331 .138 1 .239**
compliance Sig. (2-tailed) .000 .107 .005
level N 137 137 137 137
** **
Pearson Correlation .232 .226 .239** 1
Quality of
Sig. (2-tailed) .006 .008 .005
system
N 137 137 137 137
**. Correlation is significant at the 0.01 level (2-tailed).

Findings from Table 4.7 revealed that independent variable (Technology Literacy)

had strong positive relationship with dependent variable (Tax compliance level),

with the Pearson correlation values of 0.331 and relationship is significant at

confidence interval of 99% since Sig. value is 0.000 which is less than 0.01

confidence level. Furthermore; independent variables (Quality of system) had

moderate positive relationship with dependent variable (Tax compliance level) with

the Pearson correlation values of 0.239 and the relationships is significant at

 36

confidence interval of 99% since Sig. value is 0.005 which is less than 0.01

confidence level.

However, the results showed that independent variable (Security concern) had weak

positive relationship with dependent variable (Tax compliance level), with the

Pearson correlation values of 0.138 while the relationship is not significant at

confidence interval of 99% since Sig. value is 0.107 which is greater than 0.01

confidence level. This implies that Technology Literacy and Quality of system had

significant relationship with tax compliance level, therefore Technology Literacy

and Quality of system had effect on tax compliance level among SMEs in Tanzania.

ii. Regression Analysis

The study used multiple regression analysis to predict the impact of technology

literacy, Security concern and Quality of system on tax compliance among SMEs in

Tanzania. The result of analysis was presented with three tables, which is ANOVA,

Model summary, and Coefficient stable.

a) ANOVA

ANOVA table in regression analysis was telling about the model fit. This

significance in model to elaborates the deviations within the dependent variable (tax

compliance level) as shown in table 4.8. The findings from table 4.8 show that the

model of three independent variables: technology literacy, Security concern and

Quality of system and dependent variable tax compliance level is fit at the

confidence interval of 95% since the significant value is less than 0.05 which is

0.000. This implied that the model was fit and able to predict the impact of

technology literacy, Security concern and Quality of system into tax compliance
 37

level.

Table 4.8: ANOVA

Model Sum of df Mean F Sig.
Squares Square
Regression 14.919 1 14.919 16.634 .000b
1 Residual 121.081 135 .897
Total 136.000 136
a. Dependent Variable: Tax compliance level
b. Predictors: (Constant), Technology Literacy, Security concern
Quality of system

b) Mode Summary

Model summary used to explain variations of independent variables to a dependent

variable in a model. The mode summary of study explains variations of technology

literacy, Security concern and Quality of system into tax compliance level as shown

in table 4.9.

Table 4.9: Model Summary

Model R R Square Adjusted R Square Std. Error of the
Estimate
a
1 .843 .710 .703 .54104681
a. Predictors: (Constant), Technology Literacy, Security concern
Quality of system

Findings from Table 4.9 revealed that the value of R Square is 0.710 (71.0%). This

implies that the model was fit whereas proportion of the variation in the dependent

variable (tax compliance level) was clarified by independent variables: technology

literacy, Security concern and Quality of system by 71.0%. Hence the model was

able to predict the impact of all three independent variables considered in this study

which is technology literacy, security concern and quality of system on tax

 38

compliance in regression analysis.

c) Coefficients

Coefficients were used to determine the contribution of individual independent

variable to dependent variable. The multiple regression analysis in this study

provides contribution of technology literacy, security concern and quality of system

on tax compliance level as shown in Table 4.10.

Table 4.10: Coefficients

Model Unstandardized Standardize t Sig.
Coefficients d
Coefficients
B Std. Error Beta
(Constant) 9.825E-017 .081 .000 1.000
Technology
.331 .081 .331 4.078 .000
1 Literacy
Security concern -.138 .085 .138 1.623 .107
Quality of system .239 .084 .239 2.860 .005
a. Dependent Variable: Tax compliance level

4.3.1 Effect of the Technology Literacy on Tax Compliance among SMEs in

Tanzania

To determine the effect of the technology literacy on tax compliance among SMEs in

Tanzania, the respondents highlighted most challenges issues under technology

literacy factor by rating from strongly disagree=1 to strongly agree=5 as shown in

table 4.11 The findings from table 4.11 revealed that proficiency of internet usage,

computer or electronic devices usage skills and to determine successful application

in taxation are major challenges under technology literacy since the mean value is 4,

this indicated that majority of respondents were agreed. This result imply that SMEs

faced various challenges on using technology due to lack literacy on proficiency of

 39

internet usage, computer or electronic devices usage skills and to determine

successful application in taxation this lead them to fail to comply with tax regulation.

Table 4.11: Technology Literacy

Strongly Disagree Neutral Agree Strongly Mean
disagree agree
Proficiency of internet
9.0% 6.2% 29.2% 32.6% 22.9% 4
usage
Computer/devices
5.6% 6.2% 24.3% 39.6% 24.3% 4
usage skills
Basic computer trouble
9.0% 8.3% 36.8% 29.2% 16.7% 3
shooting skills
Understanding of tax
system navigation 6.3% 10.5% 27.3% 39.9% 16.1% 3
process
Use self-help menus on
7.6% 11.8% 27.8% 37.5% 15.3% 3
tax system or devices
To determine successful
6.2% 6.2% 29.2% 40.3% 18.1% 4
application in taxation
Training in new
introduced technology 9.0% 11.8% 34.7% 29.9% 14.6% 3
in taxation
Technical assistance
while failed to use tax 7.0% 11.9% 35.0% 30.1% 16.1% 3
devices or systems
Instruction of new
devices and system 7.6% 9.7% 34.0% 32.6% 16.0% 3
used in taxation
Language used in
devices and systems of 9.0% 7.6% 29.9% 34.0% 19.4% 3
taxation
Source: Field Data, 2020

Furthermore regression analysis used to predict the general effect of the technology

literacy on tax compliance among SMEs in Tanzania. The findings from table 4.10

revealed that the Beta value of technology literacy is 0.331. This means that

technology literacy contributed by 33.1% on tax compliance level and the

contribution is significant at 95% confidence interval since significant value is 0.000

which is less than 0.05 confidence level. This implies that technology literacy had

significant contribution on tax compliance level; therefore, technology literacy has

 40

impact on tax compliance level among SMEs in Tanzania.

4.3.2 Effect of Security Concerns on Tax Compliance among SMEs in Tanzania

Under security concern respondents highlighted most critical issues under security

concern factor by rated from strongly disagree=1 to strongly agree=5 as shown in

Table 4.12.

Table 4.12: Security Concern

Strongly Disagree Neutral Agree Strongl Mean
disagree y agree
Reveal business information
to cyber attendants for 21.5
13.9% 16.0% 28.5% 20.1% 3
assistance may place %
business at security risk
Reveal business information
to cyber attendants for 25.7
10.4% 16.7% 32.6% 14.6% 3
assistance may get to %
business competitors
Reveal business information
to cyber attendants for 29.2
9.7% 13.9% 34.7% 12.5% 3
assistance may place %
personal security at risk
Reveal business information
to cyber attendants for 16.0
9.0% 25.7% 36.1% 13.2% 3
assistance may not be %
handled professionally
Business data are secure for 29.2
6.9% 16.0% 34.7% 13.2% 3
being stored on the internet %
Business data can be
36.8
accessed by other system 4.9% 11.8% 32.6% 13.9% 3
%
users
System hacking/attacking 34.0
3.5% 7.6% 28.5% 26.4% 4
can lead to lose business data %
System hacking/attacking 35.4
2.1% 8.3% 29.9% 24.3% 4
can cause loss in business %
Employees can temper with 37.1
2.1% 9.8% 35.7% 15.4% 4
business data %
Source: Field Data, 2020
 41

The findings from table 4.12 revealed that system hacking/attacking can lead to

losing business data, system hacking/attacking can cause loss in business and

employees can temper with business data are major challenges under security

concerns since the mean value is 4, this indicated that majority of respondents were

agreed. This result implies that SMEs had security concerns issues of losing data

due to system hacking or attacking as well as employees can temper with business

data this lead them to fail to comply with tax regulation while technology

simplifying the procedures.

Furthermore regression analysis used to predict the general effect of security

concerns on tax compliance among SMEs in Tanzania. The findings from table 4.10

revealed that the Beta value of security concerns is 0.138. This means that security

concerns contributed by 13.8% on tax compliance level while the contribution is not

significant at 95% confidence interval since significant value is 0.107 which is

greater than 0.05 confidence level. This implies that security concerns had

contribution on tax compliance level but not significant; therefore, security concerns

has no major impact on tax compliance level among SMEs in Tanzania.

4.3.3 Effect of System Quality on Tax Compliance among SMEs in Tanzania

Additionally, respondents highlighted most critical issues regarding quality of

system factor by rated from strongly disagree=1 to strongly agree=5 as shown in

Table 4.13.
 42

Table 4.13: Quality of System

Strongly Disagree Neutra Agree Strongl Mean
disagree l y agree
The devices and systems simple
9.8% 9.1% 25.2% 39.2% 16.8% 3
and easy to use
The devices and systems
simplify works (Filing and 8.3% 7.6% 22.2% 43.1% 18.8% 4
submission of tax returns)
System hang ups leads to
7.0% 15.4% 30.8% 30.8% 16.1% 3
unwillingness to file returns
Low System quality leads to
inability to file without 6.2% 11.1% 26.4% 43.1% 13.2% 3
assistance
System hang ups leads to
incurrence of costs to pay third 6.2% 8.3% 32.6% 32.6% 20.1% 4
parties for assistances
System complexity leads to
incurrence of costs to pay third 4.9% 6.2% 34.0% 40.3% 14.6% 4
parties for assistances
Low system quality leads to
compromise of information 6.2% 7.6% 35.4% 37.5% 13.2% 3
submitted
System hang-ups leads to delay
9.7% 6.9% 29.9% 35.4% 18.1% 3
in information submission
Unfriendly tax system lead to
6.9% 4.2% 29.9% 32.6% 26.4% 4
involuntary compliance
Source: Field Data, 2020

The findings from Table 4.13 revealed that the devices and systems simplify works

(Filing and submission of tax returns), system hang ups leads to incurrence of costs

to pay third parties for assistances, system complexity leads to incurrence of costs to

pay third parties for assistances and unfriendly tax system lead to involuntary

compliance are major issue under system quality since the mean value is 4, this

indicated that majority of respondents agreed. This result implies that SMEs had

faced challenges due to quality of the system used in taxation such as incurrence of

costs to pay third parties for assistances because of system complexity and lack of

support from system own this lead them to fail to comply with tax regulation while

technology in taxation.
 43

Furthermore regression analysis used to predict the general effect of system quality

on tax compliance among SMEs in Tanzania. The findings from table 4.10 revealed

that the Beta value of Quality of system is 0.239. This means that Quality of system

contributed by 23.9% on tax compliance level and the contribution is significant at

95% confidence interval since significant value is 0.005 which is less than

confidence level of 0.05. This implies that Quality of system had significant

contribution on tax compliance level; therefore, Quality of system used for taxation

has impact on tax compliance level among SMEs in Tanzania.

 44

CHAPTER FIVE

DISCUSSION OF THE FINDINGS

5.1 Introduction

This chapter in the study presents the discussion of the findings in reference to the

contents of the previous chapter. The discussion of the findings is also related to the

reviewed empirical and theoretical studies on impact of technology on tax

compliance among small and medium enterprises in Tanzania. Since the main

objective of the study is to assess the impact of technology in tax compliance among

SMEs in Tanzania, and the three factors (technology literacy, system security

concerns, and system quality) were considered, Hence Multiple liner regression was

conducted to assess whether technology literacy, system security concerns, and

system quality has impact of technology on tax compliance among small and

medium enterprises in Tanzania.

The results shown that the overall model which comprised three mentioned factors

was fit by 0.710 (71.0%) of variance, also revealed that it is statistically significant

whereby, F(1,135) = 16.634, p < 0.05 (0.000). Moreover an inspection of individual

predictors revealed that technology literacy has Beta = 0.331, p < 0.05 (0.000) and

quality of system has Beta = 0. 239, p < 0.05 (0.005) are significant predictors of

overall impact of technology on tax compliance among SMEs in Tanzania while

security concern is not statistically significant since the Beta = 0.138, p> 0.05

(0.107).

5.2 Impact of Technology Literacy on Tax Compliance

Technology literacy is one of the factors which considered in this study to assess its
 45

impact on tax compliance among small and medium enterprises in Tanzania. The

findings indicated that technology literacy has significant impact on tax compliance

among SMEs in Tanzania since it has Beta = 0.331 and p=0.000 which is p < 0.05 at

a confidence interval of 95%. This implies that technology literacy influenced tax

compliance by 33.1% and statistically shown that this contribution is significant

predictor of overall predicators of impact of technology on tax compliance among

small and medium enterprises in Tanzania in this study.

The findings supported by Zaidi et al. (2017) urged that found that taxpayers with

computer skills will find it easy to adopt an electronic tax system than those without.

Also according to Gitaru (2017) said that education is provided to companies on

basic tax principles and other essential information to help them comply with tax

rules. Horodnic (2016) highlighted on the Tax morale increases where there is a

closer relationship between the government and citizens, expressed as legal

rights/democracy or local autonomy. This can be achieved through educating

taxpayers particularly SMEs various issues on tax compliance specifically in using

technology.

Seminars and workshops are conducted to educate taxpayers on existing tax rules

and explain new tax changes. Seminars are targeted to newly incorporated

companies and SMEs that are not represented by tax agents (Horodnic, 2016). Muita

and Mukanga (2010) conducted a study on the adoption of technology as a strategic

tool for enhancing tax compliance in Kenya found that technological knowledge

influences acceptance of e-filing and compliance among SMEs. Also Edward and
 46

Ambrose (2017) confirmed that SME lack confidence in their ability to correctly

calculate the tax payable causing them to hire experts to file for at a cost or totally

evade taxes. The study deduced that the technical skill of filing tax returns is a factor

that influences the tax compliance

Furthermore technology literacy helped SMEs to use technology effectively and then

can comply easy with tax regulation. This achievement was support the TAM which

was emphasized the role of technology in different areas especially taxation with two

main factors such are perceived usefulness and perceived ease of use of technology.

Therefore the findings support the study to rejected hypothesis (H01: Technology

literacy has no positive effect on tax compliance among small and medium

enterprises in Tanzania). According to Nyasha et al., (2013), stated that employees

perceived negatively the use of fiscal electronic devices because they are not aware

of the method and some are just resistant to change that is given all the resources

they will reject to use the advanced method. This implies that for those who have

knowledge in technology are perceived positively.

Also an OECD (2016) report, suggest that taxpayers need sufficient information and

communication technology skills (ICT skills) to interact effectively with their tax

authority. The report confirms the importance of foundation skills as a basis for the

acquisition of the skills that are and will increasingly be required in the digital

economy: “reading and writing skills become increasingly relevant to fully grasp the

benefits of technology rich societies” (OECD, 2016). It is therefore clear that

technological skills are needed to adhere to digital tax records requirements.

 47

5.3 Impact of Taxation System Quality on Tax Compliance

Quality of the system is another factor which considered in this study to assess its

impact on tax compliance among small and medium enterprises in Tanzania. The

findings indicated that quality of the system has significant impact on tax

compliance among SMEs in Tanzania since it has Beta = 0. 239 and p=0.005 which

is p < 0.05 at a confidence interval of 95%. This implies that quality of the system

influenced tax compliance by 23.9% and statistically shown that this contribution is

significant predictor of overall predicators of impact of technology on tax

compliance among small and medium enterprises in Tanzania in this study.

According to Arvini wisudawaty et al., 2018, urged that quality of the system means

is the quality of the combination of hardware and software in the information

system. System quality in tax compliance is the system which can provides reliable a

variety of tax services. The system that is easy to use, secure, and dependable,

provides easy payment mode, provides a variety of services and user-friendly is

boosts voluntary tax compliance (Haryani et al., 2015). The results from findings

aligning with TAM which was emphasized the two main factors in perceived

usefulness and perceived ease of use of technology are the key features which can

highlight the role technology on tax compliance. Moreover according to

Khairrunnisa et al., (2017), suggested that the quality of information systems affects

taxpayer compliance.

Therefore the findings support the study to rejected hypothesis (H03: Quality of

System of tax system has no positive effect on tax compliance among small and

medium enterprises in Tanzania). According to Simuyu and Jagongo (2019) indicate

 48

that there is a significant relationship between the perception towards online tax

filing in terms of ease and simple to file and the system being secure, which is

improves tax compliance levels. This implies that the quality of the system has a

significant effect on taxpayer compliance (Arvini, et al., (2018) in Tanzania.

5.4 Impact of Technology Security Concerns on Tax Compliance

Technology security concern is third factor which considered in this study to assess

its impact on tax compliance among small and medium enterprises in Tanzania. The

findings indicated that security concern has no significant impact on tax compliance

among SMEs in Tanzania since it has Beta = 0.138 and p=0.107 which is p > 0.05 at

a confidence interval of 95%. This implies that security concern has little influence

on tax compliance with only by 13.8% and statistically shown that this contribution

is not significant predictor of overall predicators of impact of technology on tax

compliance among small and medium enterprises in Tanzania in this study.

Security issues are one of the major concerns in the use technology in taxation such

as uncomfortable revealing business information to cyber attendants for assistance in

tax filing due to the fact the information that would normally presented gives an

overview of the financial performance of their businesses (Ondara et al., 2016).

Also it increased anxiety and stress due to lack of experience or comfort with using

technology or feeling threatened by technology could prevent a customer being

inclined to adopt the e filing system.

Concerns over security issues or perceived risks on the usage of the online filing

services inhabit its adoption (Mandola, 2013). The findings shown that security
 49

issues are not influence two main factors of TAM which perceived usefulness and

perceived ease of use of technology where regarded as the key features which can

highlight the role technology on tax compliance. It proposed that consumer attitudes

towards online system are positively and directly affected by trust and perceived

website reputation, and this implies that if taxpayers perceive or evaluate the e-tax

system to be secure, they will trust it and adopt it (Al-Debei et al., 2015).

The findings support the hypothesis (H02: Security concerns have no positive effect

on tax compliance among small and medium enterprises in Tanzania). Therefore the

study failed to rejected hypothesis H02. This implies that there are some issues to be

considered in technology security concerns in order to motivate the use of

technology on tax compliance among SMEs in Tanzania. Oseni (2015) opined that

the use of ICT can be disastrous if carelessly employed by both the tax payers and

the tax administrators as scammers and hackers of the internet facilities can utilize

the ignorance or the lax security of the system. According to IOTA (2017) report

urged that taxpayer confidentiality is fundamental for all functions carried out within

the tax administration, and the basic principles of data protection set out in domestic

and international legislation must be adhered to when collecting, keeping,

processing, retaining and sharing taxpayer data.

 50

CHAPTER SIX

SUMMARY, CONCLUSIONS AND RECOMMENDATIONS

This part presented the summary of the study, conclusions, recommendations as well

as areas for future study.

6.1 Summary

This study targeted to assess the impact of technology in tax compliance among

small and medium enterprises in Tanzania. The study specifically focused on

examining the effect of the technology literacy on tax compliance among small and

medium enterprises in Tanzania; the effect of security concerns on tax compliance

among small and medium enterprises in Tanzania and to examine the effect of

system quality on tax compliance among small and medium enterprises in Tanzania.

The study was conducted at Ilala and Temeke District, Dar es Salaam region and

survey method was applied in data collection from respondents. Total of 144

respondents included TRA officers, SMEs sale electronic devices and sale

motorcycles from Kariakoo international market were chosen to participate in the

study. However, the study considered various respondents’ demographic information

such as business size, business capital investment as well as business experience.

The findings revealed that technology literacy contributed by 33.1% on tax

compliance level among SMEs in Tanzania with significant value of 0.000 and

system quality contributed by 23.9% on tax compliance level among SMEs in

Tanzania with significant value of 0.005; which is significant contribution at 95%

 51

confidence interval. While security concern contributed by 13.8% on tax compliance

level among SMEs in Tanzania with significant value of 0.107; which is not

significant contribution at 95% confidence interval. Therefore, technology literacy

and system quality had technological impact on tax compliance among SMEs in

Tanzania.

6.2 Conclusions

The study related to the impact of technology on tax compliance among SMEs in

Tanzania revealed that two factors namely technology literacy and system quality

have significant impact on tax compliance among SMEs in Tanzania. However,

results show that the security concern had contribution on tax compliance level but

not significant. Furthermore, the study identified that proficiency of internet usage,

computer or electronic devices usage skills and determination of successful

application in taxation are major challenges under technology literacy. Insecurity

concern major issue is system hacking or attacking which can lead to lose business

data, business information as well as possibility of employees to temper with

business data.

Also, under the system quality factor the major issue is the complexity of devices

and systems for filing and submission of tax returns, system hang ups and system

complexity leads to incurrence of costs to pay third parties for assistances and

unfriendly tax system lead to involuntary compliance. Therefore, for success use of

technology in taxation in Tanzania will need to bear with technology literacy and

quality of the system used in tax that might continue to have positive impact on tax

compliance.
 52

6.3 Recommendations

The study provided the following specific recommended for handling the impact of

technology on tax compliance in Tanzania.

i. Improving and emphasising provision of training service to taxpayers on the

usage of technology in taxation.

ii. Ensuring the existence of reliability technological service all times in order to

ensure service availability at the time when customers need.

iii. Emphasising on appropriate security measures to secure customers

information as well as company privacy.

iv. Providing reliable technical support to taxpayers to reduce additional

assistance cost for using tax system or devices.

v. Application of simple and up to date technology to improve tax compliance

to all taxpayers.

6.4 Areas for Further Studies

This study was considered and measured tax compliance level with only three

factors which are technology literacy, security concern and quality of system.

Therefore, more studies needed to expose extra technological factors that can have

impact on tax compliance among SMES in Tanzania.

 53

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 APPENDICES

APPENDIX I: QUESTIONNAIRE

Questionnaire for SME and TRA Officers

Introduction

I am Edna Mashauri, a student at Open University of Tanzania pursuing Master of

Business Administration (Finance). I am conducting the research as part of my

study, the study titled: Impact of Technology on Tax Compliance among Small and

Medium Enterprises in Tanzania, which is conducted as a case study at Ilala

Municipal, Dar es Salaam. I am kindly asking you to respond to the questions,

which aim to assess the impact of technology on tax compliance among small and

medium enterprises in Tanzania. Note: The responses will be treated with the utmost

confidentiality and it will be used for intended study only.

Part A: Demographic information

Instruction: Please circle on appropriate letter of given options, only one for each

question.

1. What is your business or job?

a) Sales electronics devices

b) Sales motorcycles

c) TRA officer (Move to question number 4)

2. What is the number of employee in your business?

a) 1-49 employees,

b) 50–99 employees

c) Above 100 employees

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3. What is the capital investment in your business?

a) Up to Tsh 5 million

b) Above Tsh 5 million to Tsh 200 million

c) Above Tsh 200 million to Tsh 800 million

d) Above Tsh 800 million

4. What is your working experience?

a) Less than 5 years

b) 5 to 9 years

c) 10 to 15 years

d) More than 15 years

5. What is your education level?

a) Not Attended

b) Primary Education

c) Secondary Education

d) College/University

6. Do you have business/taxation knowledge?

a) Yes

b) No

7. Do you have computer knowledge?

a) Yes

b) No

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Part B: Technology Literacy

Instructions: The following questions cover general areas of Technology Literacy

of Small and Medium enterprises (SMEs). Please rate the statement by put only one

check mark (√) in each statement. Where 1=Strongly disagree, 2=Disagree, 3=Neutral,

4=Agree and 5=Strongly agree

SN Statement 1 2 3 4 5
1 Proficiency of internet usage
2 Computer/devices usage skills
3 Basic computer trouble shooting skills
4 Understanding of tax system navigation process
5 Use self-help menus on tax system or devices
6 To determine successful application in taxation
7 Training in new introduced technology in taxation
8 Technical assistance while failed to use tax devices or
systems
9 Instruction of new devices and system used in taxation
10 Language used in devices and systems of taxation

Part C: Security concern

Instructions: The following questions cover general areas of Technology Security

concern of Small and Medium enterprises (SMEs). Please rate the statement by put

only one check mark (√) in each statement. Where 1=Strongly disagree, 2=Disagree,

3=Neutral, 4=Agree and 5=Strongly agree

SN Statement 1 2 3 4 5
1 Reveal business information to cyber attendants for
assistance may place business at security risk
2 Reveal business information to cyber attendants for
assistance may get to business competitors
3 Reveal business information to cyber attendants for
assistance may place personal security at risk
4 Reveal business information to cyber attendants for
assistance may not be handled professionally
5 Business data are secure for being stored on the internet
6 Business data can be accessed by other system users
7 System hacking/attacking can lead to lose business data
8 System hacking/attacking can cause loss in business
9 Employees can temper with business data

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Part D: Quality of system

Instructions: The following questions cover general areas of quality of system used

by Small and Medium enterprises (SMEs) on tax compliance. Please rate the

statement by put only one check mark (√) in each statement. Where 1=strongly

disagree, 2=Disagree, 3=Neutral, 4=Agree and 5=strongly agree

SN Statement 1 2 3 4 5
1 The devices and systems simple and easy to use
2 The devices and systems simplify works (Filing and
submission of tax returns)
3 System hang ups leads to unwillingness to file returns
4 Low System quality leads to inability to file without assistance
5 System hang ups leads to incurrence of costs to pay third
parties for assistances
6 System complexity leads to incurrence of costs to pay third
parties for assistances
7 Low system quality leads to compromise of information
submitted
8 System hang-ups leads to delay in information submission
9 Unfriendly tax system lead to involuntary compliance

Part E: Tax compliance level

Instructions: The following questions cover general areas of assessing tax

compliance level of Small and Medium enterprises (SMEs). Please rate the statement

by put only one check mark (√) in each statement. Where 1=Strongly disagree,

2=Disagree, 3=Neutral, 4=Agree and 5=Strongly agree

SN Statement 1 2 3 4 5
1 Timeliness of tax returns filing
2 Correctly and accuracy of the filed business information e.g.
income
3 Timely payment of tax due
4 Low costs in tax returns
5 Willingness to pay tax and penalties
6 Increased amount of taxes paid
7 Minimizing the revenue loss
8 Minimizing distraction to the economy
9 Minimizing inequity and unreliability of the tax burden
10 Increasing registration of new taxpayers

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