The Influence of Provision of Public Services on Tax Compliance in SMEs: Mediating Role of Tax Morale

This study investigates the relationship between the provision of public services, tax morale, and tax compliance in small and medium enterprises (SMEs) in Tanzania. A cross-sectional research design was employed, using a sample of 479 SMEs from Dar es Salaam, Tanzania, with data collected through self-administered questionnaires. Structural Equation Modeling (SEM) was used to test the hypotheses. The results indicate that the provision of public services has a significant positive effect on tax compliance, with tax morale acting as a partial mediator in this relationship. This suggests that taxpayers’ perceptions of the quality of public services influence their intrinsic motivation (tax morale) to comply with tax regulations, which ultimately enhances tax compliance. The study contributes to the theoretical understanding of the factors that drive tax compliance by incorporating tax morale as a key mediator. Policymakers are encouraged to focus on improving public service delivery and fostering tax morale to enhance compliance rates.