The Impact Of Tax Amnesty On Tax Compliance And Tax Evasion Behavior Among Smes

Abstract

In light of the rampant increases in tax gap and the need to regularize taxpayers’ affairs, the Zimbabwean Government enacted tax amnesties under the Finance Act, 2 (2014) and Finance Act, 1 (2018) respectively. Despite the granting of the tax amnesty facility, gradual increases in tax debt have been noted and decreases in revenue collections have been recorded since the initial adoption of the program in 2014 denoting a decline in the SMEs’ level of tax compliance and revenue collection. Thus, the study assesses the impact and viability of tax amnesties towards improving SMEs’ level of tax compliance and tax revenue collections in Zimbabwe. Specifically, the objective of the study is to determine the relationship that exists between SMEs’ level of tax compliance and tax amnesties in order to ascertain the impact of the latter on tax compliance. The research employed a quantitative research method utilizing a descriptive research design to establish the association between tax amnesties and tax compliance. The sample population was drawn from SMEs in ZIMRA Region 1 database that are operating in the manufacturing industry using the snowballing technique in order to draw some concealed or hidden SMEs. The researchers adopted the multivariate regression model in order to determine the relationship between tax amnesty and tax compliance. The results from the STATA 11 explained that an inverse relationship exists between tax compliance and tax amnesty basing on the aforementioned objectives. Basing on the findings the researchers suggested publicizing post amnesty sanctions, making amnesties extraordinary rather than routine and assessing the environment in order to make any proposed amnesty worthwhile as strategies that could be implemented in conjunction with tax amnesties in order to deal with non-compliance issues of SMEs.