Tax Evasion by Small and Medium Sized Enterprises (SMEs) and the Role of Forensic Accounting: The Zimbabwean Perspective

Abstract: This study examines tax evasion among Small and Medium Enterprises (SMEs) in Zimbabwe and explores forensic accounting's role in combating this phenomenon. Using a mixed-methods approach, the research surveyed 350 SMEs across Zimbabwe's major provinces and conducted interviews with 20 key stakeholders. Findings reveal that 74% of SMEs engage in tax evasion, with sophisticated methods including cryptocurrency transactions and AI-assisted fraud. Tax evasion costs Zimbabwe approximately USD 580 million annually, representing 21% of potential SME tax revenue. Primary drivers include hyperinflation (89% of SMEs), complex regulations (72%), and inadequate enforcement (68%). The study demonstrates that forensic accounting techniques achieve 91% accuracy in detecting evasion compared to 35% using traditional audits. Key barriers include limited forensic expertise (0.3 per 1,000 SMEs), outdated technology infrastructure, and legal framework gaps. The research proposes a comprehensive implementation framework including AI-powered compliance monitoring, specialized forensic training programs, and legal reforms to support digital evidence admissibility. The study contributes to the growing body of knowledge on tax compliance in developing economies and provides actionable insights for policymakers and tax administrators.