CHAPTER ONE

1.0 ABSTRACT
The purpose of this study is to evaluate the effectiveness of collection of Tax in Dar es salaam
region. Data collection methods will comprise structured interview, documentation, and
observation. Stratified sampling technique and Judgment sampling technique will be chosen for
this study. In order to achieve maximum Revenue generated, we will have to make good and
effective ways of collection of taxes.

Due to these facts the researcher will aim at examining the effectiveness of collection of tax by
considering policy and the ways used by the organization, together with the process of using
interview, observation and documentation methods. The researchers will collect both Primary
and Secondary data. Those collected data will be processed, analyzed and summarized in
readable and easily interpretable form.

The study will be divided into four chapters; which will deals with abstract, introduction and
background to the problem, statement of the problem, research questions, objectives of the study,
significant of the study, limitations and scope of the study, the review of literature on taxes it will
comprise the theoretical and empirical literature review, research methodology, research design,
research approach, population, sampling design, sample size, data collection and methods of
collecting data, and the timetable and research budget to show how research will be conducted in
the field center.

1.1 Introduction
Page | 1
In Tanzania the Income Tax Act, 2004 came into effect in July 2004. This act restructured the

income tax system in line with modern requirements and repealed the previous Income Tax Act,

1973. Tax is levied on income from employment income from business and income from

investment. Taxable persons include entities and individuals. An entity can be a corporation or a

trust, and a corporation is loosely defined to mean any incorporated or unincorporated body of

persons or association. For partnerships the individuals within the partnership are taxed on their

share of the income. Taxation is on worldwide income for residents (or for individuals, of

residents of more than two years) while taxation of non-residents is on Tanzanian source income

only.

1.2 Background of the study

In order to effectively and efficiently implement fiscal policy the Government during 1995/96

established an autonomous revenue administration under the TRA Act No.11 of 1995, the

Tanzania Revenue Authority (TRA), charged with the assessment, collection and accounting of

Central Government revenues. Since then, TRA has to a larger extent increased the efficiency,

effectiveness and transparency in revenue administration, features that were lacking under the

regime that was replaced. Under the new tax administrative arrangement the government has

achieved significant transformation in revenue mobilization through initiating several

administrative measures aimed at streamlining it, modernizing systems and removing

inefficiencies.

However, The TRA may have an advantage in collecting the Service Levy, as the Service Levy

is levied on a similar basis as the central government’s VAT. As such, it might be possible for
Page | 2
TRA to act as a collection agent for LGAs and possibly receive a collection fee of one or several

percent. Likewise, since all vehicles in Tanzania are centrally registered, TRA would also be

well positioned to collect local vehicle registration fees (if indeed assigned to the local

government level). In contrast, TRA would not necessarily be in a superior position to administer

local property rates, as it has no particular expertise in property valuation or enforcement of

property tax payments. Of course, this should not preclude the TRA from acting as a collection

agent for a local authority upon mutual agreement between the TRA and an LGA

1.3 Significance of the problem

This research which will be conducted will be much importance to the Tanzania revenue

Authority since it’s the main operator of the tax system as well as the government due to the

findings which will be obtained. It will help the tax operator to make good and desired decisions

on improving the government revenue. Not only that but also it will helps in

• Providing solutions to the TRA tax administration

• Control of the public revenue by the government

• Provide practical experience

• It will help to meet the professional requirements, since the research is the key factor for

successful completion of the academic year.

• It will generate new knowledge

1.4 Statement of the problem

Page | 3
Tanzania is undertaking a variety of macroeconomic and structural reforms aimed at laying the

foundation for higher and sustained economic and social development. One of those reforms is in

good collection of tax system in order to increase the government revenue. In collection of

revenue the tax collection will be categories as the the local level valuation department which is

responsible for the valuation roll and issuance of the tax demand notices, the actual revenue

collection and enforcement activities are administered through the Town Treasurer’s office, Poor

collection of taxes of the tax is considered to be a problem in increasing of the government

revenues due to the followings;

• Conflicting Jurisdiction over tax collection (who should collect the tax); - In the fact of

who will collect the tax there is a misunderstanding whether there should be collected by

the local government or the Parastatal organizations.

• Limited revenue to be collected and unidentified other resources of revenue

• High transactional cost involved in tax collection

• Limited capacity of tax collecting institutions or agencies (lack of transport , limed

manpower , limited knowledge in record keeping , corruption)

• Lack of transparency and corruption. Key factor that lack transparency are Central

government vs. Local government, District Council Vs Village Councils or Government

Vs Village Assembly which represent the community as they serve.

• Low understanding among stakeholders to why they due pay tax

• Old unrevised pricing and tax regulations and prices /taxes that below the present market

value

Page | 4
 • Lack of profitable benefit sharing scheme and mechanism to commit tax payers and

resources managers to their responsibilities of sustainable resources management and tax

collection.

• Conflicting laws that needs to be harmonized

• Poor infrastructure to allow easy access to communities , investment areas for collection

of tax ( island not easily reachable , remote areas with impassable roads , wildlife and

lack of secure transport )

• Poor services (people can refuse to pay tax if are not served e.g. to pay water and

electricity flat rate fees where pipes are always dry and power is lacking)

1.5 Research objective

The study will be carried out in order to attain the following;

1.6 General objectives

The overall objective of this research is to increase the government awareness in collection of the

revenue through its parastatals so as to generate the high revenue hence development will be

achieved.

1.7 Specific objectives.

• To determine the challenges and obstacles that government face in controlling

the collection of the taxes

• To determine if the existed ways of tax collection is effective.

Page | 5
 • To determine if the existence policy of taxation is satisfied enough to increase

the taxes.

• To investigate whether the customers reached by the tax collectors’ services

• To identify the extent of which TRA give priorities to the achievement of high

tax collection.

1.8 Hypothesis

Hypothesis is tentative proposition formulated for empirical testing. (Kothari 2004). It is a

declarative statement combines concepts, it is a tentative answer to a research questions, thus a

hypothesis can be said to be a proportion which can be put to a test to determine its validity.

1.9 Scope of the study

The study will be confined on the way tax is collected, tax administration, tax law in order for

the promotion of the good tax collection. The study will be conducted in Dar-es- salaam region

in the office of the Tanzania Revenue Authority .In those offices it will be easier for the

researcher to access the data needed.

Page | 6
 CHAPTER TWO

2.0 LITERATURE REVIEW.

INTRODUCTION;

Collection of tax is one of the revenue sources of local authorities as well as the government at

large, whereby through the good collection of taxes the government revenue it will increase.

There are different kinds of tax on which this chapter will tend to introduce by which they are

administered in the domestic revenue department.

2.1 Definition of the key terms

Tax is a compulsory levy or charges by the state on her citizens and non citizens alike that is

usually payable in monetary form of which the government needs not offer equivalent direct

compensatory service or render an individual account on how it utilized the revenue.

(Mponguliana, R.G 2000)

According to freeman and shoulders (1993) revenue may be operationally defined in government

fund accounting context as all increase in fund net asset except those arising from inter fund

operating and residual equity transfer or long term debt issues.

TYPES OF TAXES

Taxes are generally classified into two types, Direct and Indirect taxes.

Direct Taxes; these are taxes directly levied on people‘s income from employment and business

and investment. The impact and incidence of the tax falls on the same person, the incidence

Page | 7
cannot be shifted to another person. Example s Corporation tax, Pay As you Earn and

withholding taxes.

Indirect Taxes; These are taxes which are based on consumption; Examples of such taxes are

like, Value Added Tax, Import Duty, and Excise Duty etc. A tax is said to indirect when the

impact of tax fall on the trader who acts as an agent of the government while the incidence falls

on the final consumer who actually pays the tax. Since the tax is levied on the consumption of

goods and services. It depends directly on the level of consumption of a particular taxable

commodity by the population.

MODERN TAX ADMINISTRATION

The modern tax administration ensures that the tax system in force does not affect unfavourably

the consumption pattern of the household, where consideration is given to the fact that affects an

individual’s income and hence their consumption patters and savings. A good tax system is

supposed to elaborate transparent equitable and simple to administer.

PURPOSE OF TAXATION IN THE ECONOMY

The following are some of the purpose for which taxation is imposed which are as follows;

I. Fiscal purposes; Taxes are imposed to raise sufficient money for the performance of

certain functions which are associated with the idea the country against foreign attack.

II. Protective purposes; Taxation can also be used to protect newly established home

industries against foreign competition. This can be done by subjecting imported goods to

higher customs tariffs so that the home made goods can successfully compete with the

imported goods
Page | 8
III. Moral purpose; Taxation can also be used by the government to reduce the consumption

of which is regarded as harmful taxes on alcoholic drinks, cigarettes, fall under this

category. The idea is to restrict excessive consumption.

IV. Social purpose; Taxation is being increasingly utilized in the present day public finance

to reduce wide disparities in distribution of income and wealth between rich and poor.

With this end in view, the rates of taxation go on rising as one’s income rises.

There are different kinds of taxes by which the Tanzania Revenue Authority tends to collect

which are;

2.2 Value Added Tax (VAT)

VAT is an indirect tax on consumption levied on a wide range of supplies of goods and services.

VAT is a multistage tax charged on value added to goods and services by producers and traders

at each stage of production and/or distribution. Registered traders are the collecting agents for

the Government. VAT was introduced in Tanzania on July 1st 1998 and replaced sales tax on

goods and services, receipts based stamp duty, hotel levy and entertainment tax applicable to

VAT registered businesses.

VAT is charged at a single positive rate of 20%. The taxable value for local supplies is the

amount of money the customer has to pay for the goods and services, or the open market value of

the goods and services. Exports are zero-rated meaning that no tax is charged on exports but a

registered trader supplying goods and services for export can reclaim tax on inputs. Zero-rating

Page | 9
exports ensures that they enter the international market tax-free thereby making them

competitive.

Supplies of most basic goods and services, which accounts for disproportionately high

percentage of low-income household spending have been exempted from VAT. For exempted

supplies of goods and services, the trader supplying them does not charge VAT to his customers

and he is not entitled to a refund on taxes paid on his purchases.

2.3Property tax;

The English oxford Dictionary defines a property as an inherent or essential quality or pecuniary,

ownership, possession a thing or something that is owned to somebody

Meigs , W Bet al (1978) , defines property tax as based on assessed value of real and personal

property, usually the primary source of revenue for local governmental units. From the viewpoint

of the business owning property, property taxes are part of the cost of the services of such

property. Legally property taxes arise as of a particular date, usually on the so called lien date,

the date established by the law on which the taxes become a lien against the property. When the

property is sold or transferred, the lien date determines whether the buyer or the seller is liable

for payments of the tax.

2.4 Corporation Income Tax;

Page | 10
It is levied on corporation taxable profit for all companies registered and or carrying business in

Tanzania. The applicable corporation income tax rate is 30% usually paid in two stages. The

provisional tax is paid based on taxpayer own estimates at the beginning of the business year and

final tax is paid after the official assessment of the income in the respective year of income.

2.5 Personal Income Tax

Personal income tax is a tax on resident person annual income obtained world-wide and on

Tanzania source income of non- resident’s .The income includes any gains or profits

from business, employment or services rendered. The personal income tax in Tanzania

is calculated by using two methods, which are for salaried employee the tax known as

PAYEE by which held by employers, and the second method is used for sole traders

and self employed individuals where assessments of their annual incomes is made based

on field returns. Income tax is charged and payable for each year of income by every

person who has taxable income for that year of income or who has a domestic

permanent establishment that has repatriated income for that year of income.

Chargeability to income tax extends to those who received a final withholding payment

during a year of income.

The individual tax rates are divided into three categories as follows: -

The tax rates which are applicable to the total income of resident individual persons (including

employees) range from 15% on an annual income of more than shs. 1,200,000 and to the highest

marginal rate of 30% which is levied on an annual income of shs. 8,640,000 and above.

TOTAL INCOME TAX PAYABLE

Where Total income does not exceed NIL
Page | 11
 Tshs. 1,200,000
Where Total income exceeds
Tshs.1,200,000 but does not exceed
4,320,000
Where Total income exceeds Tshs
4,320,000. but does not exceed Tshs.
6,480,000
Where Total income exceeds Tshs.
6,480,000 but does not exceed Tshs
8,640,000
15% of the amount in excess of Tshs.
1,200,000
Tshs 408,000 plus 20% of the amount
in excess of Tshs. 4,320,000
Tshs. 900,000 plus 25% of the amount
in excess of Tshs. 4,320,000

2.6 Skills and Development Levy

This is a tax based on the gross monthly emoluments paid by employers to employees. The law

governing this tax is known as Vocational Education and Training Act, which require employers

with four (4) or more employees to pay the tax every month. The tax rate is 6% of the total gross

emoluments paid during the month. Two thirds (2/3) of the levy goes to the Treasury and the

remaining one third (1/3) is remitted to the Vocational Education Training Authority (VETA).

Those are different kinds of taxes by which researcher will tend to emphasize on the good

collection on those taxes.

2.7 Importance of taxation to the economy.

I. It helps in Capital formation is important in all economic model.

II. It helps in providing principle methods of financing, when it comes to the borrowings and

financial aids.

III. It provides means for the resource mobilization.

Page | 12
IV. It acts as the instruments of transferring of purchasing power for individual and

government.

CHAPTER THREE

Page | 13
3.0 Research Methodology

In this chapter is intended to give a brief description on how the study will be conducted. The

chapter describe the area of the study, population, sampling techniques and the method of data

collection, the unit of inquiry investigated, sampling procedures, data analysis strategy and

limitations.

3.1Research design

A case study design approach will be used and the researcher will concentrate on the department

of the Domestic Revenue in both regions offices in Dar es Salaam. There will be an attempt to

assess the collection of the tax systems.

Kothari, (2002) defines case study method as a technique by which individuals factor whether it

is an institution or just an episode in life of an individual or a group is analyzed in its relationship

to any other in the group.

Kothari went further by saying that, under case study method the approach happens to be

quantitative and not qualitative, therefore data collected was analysed and presented using the

qualitative technique

The case study approach has the following advantages from other methods;

I. Being an exhaustive study of social unit, the case study method enables as to understand

fully the behaviour pattern of the concerned units

II. Through case study a researcher can obtain a real and enlighterened record of personal

experiences which would reveal man’s inner striving , tensions and motivations that drive

him to action along with the force that direct him to adopt a certain pattern of behaviour.
Page | 14
 III. This method enables the researcher to trace out the maturity history of the social units

and its relationship with the social factors and the forces involved in its surrounding

environments.

IV. The method facilitates intensives study of social units that is generally not possible if we

use either the observation method of collecting information through schedules.

V. The method is a means of too well understand the past of a social unit because of its

emphasis of historical analysis.

VI. Case study enhances the experience of the researcher and this in turn increases his

analyzing and skill.

VII. Case study techniques are indispensable for therapeutic and administrative purpose .

They are also of immense value in taking decisions regarding several management

problems

Apart from the above advantageous, the case study method has the following limitations;

I. Case situations are seldom comparable as such the information gathered in case studies is

often not comparable.

II. The danger of false generalization is always there in views of the fact that no set rulers

are followed in collection of the information and few units are studied.

Page | 15
III. It consumes more time and requires lot of expenditure. More time is needed under case

study method since one study the natural history cycles of social units and that too

minutely

IV. Case study method is based on several assumptions, which may not be very realistic at

times, and as such the usefulness of case data is always subject to doubt.

V. Case study method can be used only in a limited sphere; it is not possible to use it in case

of a big society. Sampling is also not possible under a case study method.

3.2POPULATION;

During the study, the population will be the tax payers and the tax collectors, managers and

accounts officials who will provide useful information to the research

3.3 SAMPLING PROCEDURES;

This is where by the researcher must decide the type of sample he will use, he must decide about

the technique to be used in selecting the items for the sample. In fact this technique / procedure

stand for the sample design itself. There is several sample design out of which the researcher

must choose on for his study. Obvious, he must select that design which, for a given sample size

and for a given cost has a smaller sampling error (Kothari 2004)

During the study two types of sampling procedures will be used.

a) Simple random sampling

b) Judgemental sampling
Page | 16
3.4 SAMPLE RANDOM SAMPLING;

Nachmias, (1996) defines sample random design as the basic probability sampling design. It is a

procedure that gives each of the total sampling units of the population an equal and known non-

zero probability of being selected

3.5 JUDGEMENTAL SAMPLING;

Judgemental sampling will also be used in order to obtain a list of revenue collectors, accounts

officials and heads o departments for interview.

3.6 DATA COLLECTION METHOD

This research will going to be conducted in both primary and secondary data services, primary

data will be obtained through interview , questions and observation while documentation will

play a great role in the collection of secondary data.

Primary data are those which are collected afresh and for the first time, and thus happen to be

original in character. (Kothari ;95)

Secondary data are those which have already been collected by someone else and which sort of

data he would be using (thus collecting) for his study and accordingly he will have to select one

or the other method of data collection. (Kothari; 95)

Page | 17
3.6.1 Interview

This method of collection data involves presentation of oral –verbal stimuli and reply in term of

oral-verbal responses. (Kothari 2004). In this type of research, the study will be used to structure

interview to collect primary data direct from the workers and staffs of the Tanzania Revenue

Authority (TRA)

3.6.2 Observation

The researcher will participate in the activities of the Revenue departments and sometimes visits

to headquarter of collection activities to observe the conduct of the tax activities as well as to

validate data attained from other methods.

3.6.3 Questionnaires

It can be defined as the set of questions presented to the respond for their answers (Kotler

1997) .To enhance the relevancy of primary data to be collected, the researcher will use both

open ended and close questions. This helped the respondents to save time and at the helper the

research to get necessary information required. The researcher used this technique because some

responded do not feel free to give their views or opinions if they are faced with the researcher.

However questionnaire presents the most commonly used research collection tool.

Page | 18
3.7 Data analysis strategies

Is the computation of certain measures along with searching for patters of relationship that exist

among groups or data (Kothari). Not only that but also it can be defines as the process of

bringing order, structure and meaning to the mass of information collected. After organizing and

edit the collected data, then it will be easy to enter the data into a computer, computer software

will be used much as statistical package for social science (SPSS) spreadsheet.

3.8 Limitations;

• Time and financial constraints; the financial budget allocated to this will be small

compared to the task to be accomplished. In additional, the time allocated is also limited

compared to the task which will be accomplished.

• Inaccessibility and reluctance of respondent

• Language barriers

Page | 19
 CHAPTER FOUR

IV.0 ACTION PLAN;

Activity Duration / weeks

Weeks 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16

Distributing Questionnaires

Conducting interview

Data collection

Data processing

Data analysis and interpretation

Making the first draft of the research

Correction of any errors from first draft

Final report writing and submission

Page | 20
4.1 BUDGET

The fieldwork is expected to commence on late march 2010 and will end in june2010 It will
cover a minimum of 16 weeks. At the end of the study the research paper will be submitted at the
University of St John’s as the fieldwork. The budget expects to be used is summarized below.

S/NO. Cost category No of units Cost breakdown Sub Total cost Total cost
1 Up – keeping cost. 119days 5000×119 595,000

Meal and break fast 595,000

2 Transport 119days 1200×119 142,800

Back and forth 142,800

3 Stationary
2 reams
Plain paper Reams 2×4500 9,000
4 31,000
Pens 4×500 2,000

Data server 20,000 20,000

4 Secretarial Services
6,000
Typing
35,000
Printing
2,000 48,000
Photocopying
5,000 48,000
Binding
5 Miscellaneous Expenses 50,000

50,000
TOTAL 866,800 866,800

Page | 21
 ST JOHN’S UNIVERSITY OF TANZANIA

FACULTY OF COMMERCE AND BUSINESS STUDIES

BACHELOR OF BUSINESS ADMINISTRATION

SUBJECT: RESEARCH METHODOLGY AND CONSULTANCY.

CODE: GM 300

NATURE OF WORK: Research proposal

NAME: TAWA DAVID

REGISTRATION NUMBER: 2007/O774

YEAR OF STUDY: 3rd

PROPOSAL TITLE; TAX COLLECTION

COURSE SUPERVISOR: DR. KIPANGA

BIBLIOGRAPHY;
Page | 22
Kothari C R, “Research Methodology Methods and Techniques,” New Age
International (P) Ltd Publishers

Mponguliana , R.G “ Taxation management”, morogoro Mzumbe university

Freeman and Shoulders. 1993.Revenue assessments.3rd Ed .Belmount, CA;

Wadsworth.

TABLE OF CONTENT;

CHAPTER ONE

1.0 Abstract ......................................................................................................................................1

Page | 23
1.1 Introduction ....................................................................................................................................2

1.2 Background of the study ..................................................................................................................2

1.3 Significance of the problem .............................................................................................................3

1.4 Statement of the problem..................................................................................................................4

1.5 Research objectives ..........................................................................................................................5

1.6 General objectives ............................................................................................................................5

1.7 Specific objective ..............................................................................................................................5

1.8 Hypothesis ........................................................................................................................................6

1.9 Scope of the study ............................................................................................................................6

CHAPTER TWO

2.0 Literature review ...............................................................................................................................7

2.1 Definition of the key terms ...............................................................................................................7

2.2 Value Added Tax ..............................................................................................................................9

2.3 Property Tax .....................................................................................................................................10

2.4 Corporations income ........................................................................................................................11

2.5 Personal income Tax ........................................................................................................................11

2.6 Skills and Development levy ............................................................................................................12

2.7 Importance of Taxation in the economy ...........................................................................................12

CHAPTER 3

3.0 Research Methodology .....................................................................................................................14

3.1 Research Design ................................................................................................................................14

3.2 Population Design .............................................................................................................................16

3.3 Sampling procedure ..........................................................................................................................16

3.4 Sample Random Sampling ...............................................................................................................17

3.5 Judgement Sampling .........................................................................................................................17

3.6 Data Collection Method ....................................................................................................................17

Page | 24
 3.6.1 Interview ...................................................................................................................................18

3.6.2 Observation ..............................................................................................................................18

3.6.3 Questionnaires ..........................................................................................................................18

3.7 Data analysis strategies .....................................................................................................................19

3.8 Limitations..........................................................................................................................................19

CHAPTER FOUR

4.0 Action plan ........................................................................................................................................20

4.1 Budget ................................................................................................................................................21

Page | 25