Why Small Scale Businesses Hesitate With Tax Receipts

Carlos, is 28 years, he runs a small business as a graphic designer in a cramped bedroom that doubled as his workspace.

Carlos, has for many years tirelessly tried all means just to earn a decent living after completing his form four education.

Converting a part of his bedroom to a workspace , was the only choice left. The meager income he earned by designing artworks for people, barely covered his expenses, leaving him struggling to make ends meet.

As Carlos, continued to hone his craft and attract a few clients, he faced a dilemma. The burden of paying taxes weighed heavily on him, as his earnings were minimal.

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The obligation to pay taxes became a significant financial strain for him, making it challenging to sustain his business..

Faced with this predicament, Carlos found himself in a difficult position. To avoid further financial hardship, he made the tough decision to forgo issuing receipts to his clients. Despite understanding the importance of tax compliance, the harsh reality of his financial situation forced him to take this risk.

As Carlos navigated the challenges of being a young entrepreneur in Tanzania, he remained determined to pursue his passion for graphic design. Despite the obstacles he faced, he held onto the hope that one day his hard work and dedication would lead to a brighter future, where he could thrive without compromising his principles.

In the bustling landscape of Tanzania’s small-scale businesses, a prevalent issue looms large – the reluctance to issue tax receipts. The practice raises concerns about compliance, transparency, and the overall health of the economy , coupled with  its underlying reasons behind this fear, and the urgent need to address them effectively ,could forster a culture of Tax compliance and accountability.

Rahma Musa,  also a Small Business Owner at Karioko market says  “As a small business owner in Tanzania, I often hesitate to issue tax receipts due to the complex regulations. I would like to see more support and guidance to help us navigate the tax system effectively.”

Grace Mushi, an Economic Analyst , warms that  small scale businesses who are reluctance to issue tax receipts to their clients are further worsening the economic woes of that country , as their actions  will have detrimental effects on the economy.  She however suggest for government to explore ways to incentivize compliance and address the root causes of this fear for sustainable economic development.

Tax Consultant Amina Jones believes,”From my experience, many small businesses fear issuing tax receipts due to misconceptions about penalties and compliance. Education and awareness are key to addressing these fears and promoting tax compliance.”

One significant factor contributing to this apprehension is the complex tax system and its regulations , the perceived burden of compliance for small businesses,coupled with limited resources and the understanding of tax laws, often overwhelm small-scale entrepreneurs. This, leads to a fear of making errors or facing penalties, deterring them from issuing tax receipts.

To address these challenges, a multi-faceted approach is essential. Simplifying the tax system and providing accessible guidance on compliance for small businesses can alleviate the burden and confusion surrounding tax obligations in the country.

Again fostering a culture of accountability and integrity through awareness campaigns and incentives can motivate small-scale businesses to embrace tax compliance willingly. Offering support in transitioning from informal to formal business practices and providing incentives for tax compliance can help bridge the gap between fear and compliance.

Enhancing transparency in government spending and demonstrating the tangible benefits of tax contributions can also go a long way of building  trust and encouraging compliance.

Overcoming the fear of issuing tax receipts among Tanzania’s small-scale businesses  indeed requires a concerted effort from both the government and business community .

By simplifying compliance procedures, enhancing transparency, and promoting a culture of accountability, the country can pave the way for a more robust and sustainable economy built on trust, integrity, and mutual benefit. It is time to empower small businesses to embrace tax compliance as a stepping stone towards growth, sustainability, and shared prosperity for all.