Effects of Tax Incentives on Small and Medium Enterprises Compliance in Moshi District, Tanzania

This study investigates the impact of tax incentives on the tax compliance behavior of small and medium enterprises (SMEs) in Moshi, Tanzania. It specifically examines the influence of various tax incentive components on SME compliance and explores the challenges SMEs face in utilizing these incentives. A cross-sectional research design was employed, with a purposive sample of 100 SME operators selected through non-probability sampling techniques. Data were analyzed using STATA and SPSS. A descriptive method and a binary logistic regression were employed to examine the relationships between tax incentives and compliance. The findings reveal that tax allowances, effective communication about incentives, taxpayer training and education, and simplified tax procedures have positive and statistically significant effects on SME tax compliance. Conversely, access to credit was found to have a negative and significant effect on compliance. Additionally, corruption and lack of awareness were identified as major barriers hindering SMEs from fully benefiting from available tax incentives. To enhance tax compliance among SMEs, the study recommends that the government improve transparency in tax incentive provision to combat corruption and simplify tax collection procedures to make compliance more accessible. These measures have the potential to foster voluntary compliance and increase the overall effectiveness of tax incentive policies.