Alignment of Expectations in Electronic Fiscal Devices Adoption: Perspectives of Enforcers and Traders in Tanzania

Abstract

Taxation has been a fundamental source of government revenue throughout recorded history. While the forms of taxes and collection methods have evolved with time and technological advancements, the primary objective remains unchanged: enabling governments to fulfil their socio-economic responsibilities. Despite the long-standing history of tax collection, there has always been a degree of distrust between taxpayers and tax enforcers. This study examines the extent to which the expectations of tax enforcers align with those of traders regarding the introduction of Electronic Fiscal Devices (EFDs) in Tanzania’s tax system. A mixed-methods approach was employed, incorporating both qualitative and quantitative data collected in 2024 from Dar es Salaam, the country’s primary business hub. The Likert scale was used to gauge various qualitative variables of interest, while inferential statistical methods, including chi-square tests, were used to assess relationships between socio-economic characteristics and EFD adoption. The findings revealed that Tanzanian traders overwhelmingly agree that every citizen should pay taxes and that taxes are intended for the public good. Traders also supported the use of EFDs as efficient tools for tax collection, acknowledging that EFDs have led to an increase in tax revenue and have had a positive impact on their business performance. However, traders expressed concern about the lack of transparency regarding how the taxes they pay are spent. Additionally, they expressed discomfort with the enforcement of EFDs by the Tanzania Revenue Authority (TRA), citing perceived elements of unfairness in the process. Chi-square tests indicated significant associations between traders’ education levels and their perception of EFD benefits (χ² = 10.87, p < 0.05), as well as between business experience and compliance with EFD regulations (χ² = 9.45, p < 0.05). These findings suggest that traders with higher education levels are more likely to perceive EFDs positively, while those with extensive business experience exhibit better compliance. Overall, traders agreed with 71.4% of the tax-related practices in the country, indicating that the expectations of tax enforcers and traders are largely aligned, especially with tax collection and the introduction of EFD machines. This study highlights the importance of ensuring transparency in tax expenditure and addressing concerns related to fairness in enforcement to foster trust and improve the effectiveness of the tax system in Tanzania.