Assessing the Turnover Tax Compliance among SMEs in Informal Sector: A Case of Lusaka Central District

The study, aimed to assess turnover tax compliance among SMES in informal sector as a case study of Lusaka central district. The study adopted three major specific objectives which were to analyze turnover filing and payment patterns among SMEs, to assess the effectiveness of tax awareness programs in promoting compliance and to examine the impact of the broader business environment on turnover tax compliance. Furthermore, the study was bucked by Tax Compliance Theory, which aims to ascertain the economic, psychological as well as institutional factors that influences taxpayer behavior. In this regard, the study employed a descriptive research design through use of a mixed method approach with a sample size of 50 SME’s that were selected randomly as well as ZRA officers who were purposively selected from Lusaka Central District. Data was collected through a survey using structured questionnaires and was analyzed using STATA in order to generate quantitative tabulations of statistical results, whereas qualitative data was thematically analyzed. In this regard, the study findings revealed that less than 50% of SMEs in informal sector meet their turnover tax obligations on an annual basis, as respondents identified key barriers that exist in creating this gap. Therefore, the key barriers included factors such as inadequate tax awareness, unwieldy filing procedures, unpredictable business environment which are heavily characterized by economic variations as well as limited resources. Further, officer respondents from ZRA also reported some of the challenges especially in the remitting tax payment by the SME’s in within business such as system failures and other factors including late payments tracking as well as misunderstandings surrounding tax regulations, which are a clear hindrance to the compliance efforts. Furthermore, the study recommended enhancement of tax education initiatives and well as programs that are tailored to the SMEs. Additionally, the study also recommended the simplification of tax filing processes and procedure in order to create an environment for SME’s to be compliant as well as enlightening support from the Zambia Revenue Authority (ZRA). Moreover, the process of fostering a more stable economic environment will not only serve as essential for reassuring compliance but a key development for a compliant market. In conclusion, this research underlined critical need for targeted intervention to improving tax compliance rates amongst SMEs, which leaves a solid and vital ground for an increased government revenue that provides support to sustainable growth of the SME sector in Zambia.