The impact of government taxation policies and administration on sustainable voluntary compliance behaviour of the informal sector in Zimbabwe

Abstract

In an effort to widen the revenue base, the Zimbabwean government has of late realised the important role being played by the informal sector.In an effort to maximize revenue from the sector key tax policies and administrative practices have been enunciated and implemented. However there has been little to show for all these efforts as tax revenue from this sector has not been consistent and budgets cannot be guaranteed of income from this sector. The reason behind this failure to realise the potential revenues from the sector despite a raft of measures is the major thrust of this study. This study sought to investigate the impact that the formulated policies and administrative systems have had on the sustainable voluntary tax compliance by the informal sector in Zimbabwe and specifically focusing on the manufacturing sector operating within Harare’s Siyaso area. The researcher realised that the issue of sustainability within the informal sector has continued to be left out by studies on this sector, and therefore sought to fill this gap. The researcher targeted manufacturers of wood, metal and cement products among many other. The researcher did a review of literature and identified taxation policies and administrative factors as the independent variables, whilst sustainable voluntary compliance made up the dependent variable. The study was quantitative in nature and given the population of registered informal sector businesses, the researcher settled for a sample size of 345 participants. Although the researcher was cognisant to the fact that manufacturing within the informal sector takes various trades, the fact that these are governed by the same taxation policies and administrative systems, the simple random sampling procedure was adopted. Data was collected using the self-administered questionnaires and consequently analysed, aided by the statistical software package SPSS. The findings of the study revealed that although taxation associated costs and availability or non-availability of tax education positively relate with sustainable voluntary compliance, these factors do not significantly impact sustainable voluntary compliance within the informal sector. However, the study found out that compromising the tax principles of fairness, equity and certainty and disregarding the fiscal exchange principle in tax administration significantly impact sustainable voluntary compliance within the sector. By gaining an understanding of these underlying factors, the authorities, should enunciate policies that results in a tax system that is robust, whilst ensuring that taxpayers benefit and receive services from paying taxes. These measures will go a long way in ensuring sustainable voluntary compliance behaviour within the sector