Influence of Micro and Small Enterprises’ Participation in Tax Assessment Processes under the Presumptive Regime: Evidence from Kinondoni Tax Region, Tanzania

Abstract

This study examines the influence of participation of Micro and Small Enterprises (MSEs) in tax assessment processes on voluntary tax compliance under the
presumptive regime in Kinondoni Tax Region, Tanzania. Despite the introduction of simplified taxation and the regime’s intent to simplify taxation for informal
businesses, limited participation persists, and voluntary compliance remains a challenge, particularly among informal sector actors. Guided by Public Participation Theory and Tax Morale Theory, the study assessed how participatory engagement affects compliance behaviour. Furthermore, both theories suggest that awareness and inclusive engagement in tax matters strengthen compliance. A pragmatic research philosophy informed the use of a mixed-methods case study design. A total of 577 MSEs, stratified by ward, selected through purposive and stratified probability sampling, formed the study sample. Data collection was executed via structured interviews, in-depth interviews, focus group discussions
and document review. Descriptive statistics and binary logistic regression were used to determine the strength and significance of the participation–compliance relationship. Quantitative data were analysed using binary logistic regression to determine the causal-effect relationship between participation and voluntary tax
compliance. Findings reveal low participation in tax assessment, which significantly influences compliance behaviour among MSEs, thereby influencing voluntary tax compliance (VTC). Respondents cited limited involvement, lack of transparency, and institutional mistrust as barriers. The study concludes that inclusive tax governance strategies can enhance compliance behaviour.
Theoretically, the study underscores the value of participatory and behavioural approaches. Key policy implications include the need for participatory tax reforms (featuring expanded stakeholder engagement), participatory reform of assessment mechanisms and enhanced taxpayer education to raise awareness and foster accountability. The study contributes to the literature by empirically linking participatory assessment to compliance outcomes in the Tanzanian informal sector.