Drivers of Rental Income Tax Compliance in Emerging Economic Countries: Insights from Tanzania

Abstract

This study investigates the drivers of rental income tax compliance in emerging economic countries, the case of Tanzania. Employing a quantitative approach, a hierarchical regression model was employed to explore factors influencing tax compliance. The research examines attitudes and perceptions towards the tax system, its structure and efficiency, knowledge and awareness of tax responsibilities, and the role of penalties and interest. The findings indicate favourable attitudes and perceptions toward the tax system significantly enhance compliance. A well-structured and efficient tax system correlates with higher compliance levels, highlighting that simplified procedures and transparency can improve adherence to tax obligations. Increased knowledge and awareness about tax responsibilities also positively impact compliance, with educated landlords being more likely to adhere to regulations. Additionally, penalties and interest are a significant deterrent to tax evasion. The study reinforces economic deterrence theory by demonstrating that the threat of penalties influences compliance behaviour, supporting the need for effective enforcement mechanisms. It underscores the importance of knowledge and education in promoting compliance. Policymakers should enhance tax system transparency, simplify procedures, and implement educational programs and robust enforcement mechanisms, including regular audits and significant penalties, to improve compliance rates. Future research should explore socio-cultural influences, economic pressures, and informal networks affecting compliance.

Keywords: Rental Income Tax Compliance, Tanzania, Tax System Efficiency, Knowledge and Awareness, Penalties and Interest