Tax compliance in an EFD-enabled environment: Evidence from a developing economy

The focus of this study was to assess the contribution of Electronic Fiscal Devices (EFDs) to ensuring tax compliance among small business owners in the Arusha Region in Tanzania. The study was motivated by the fact that the government of Tanzania has invested effort and funds to ensure that revenue adequately supports development projects. Regardless of effort, there is continued reliance on external sources of funds to support development projects. This poses a question on how the introduction of EFDs would increase tax compliance and eventually impact the government income for development projects. The main objective of the study was to determine whether the rate of using EFDs, the level of transparency, fairness in tax procedures, and the perceived audit effectiveness affect the level of tax compliance. Data was analyzed using descriptive procedures, One Way ANOVA, Chi-Square, and ordinal regression. Findings of the study are as follows: First, fairness in tax procedures, the perceived level of transparency and the rate of EFD use had no impact on the level of tax compliance; second, business and EFD use experience, audit effectiveness, and the use of EFDs in tax audits have impacted tax compliance. The study recommends other government departments to consider adopting relevant technology in operational areas where transparency, fairness and compliance are required. The inclusion of other sectors not currently captured by EFD use will be a step in the right direction.