Barriers to tax compliance for medium, small, and micro enterprises (MSMEs) in Zambia

  • This study examines the barriers that contribute to the low levels of tax compliance among MSMEs in Zambia.
  • The brief presents findings from an original survey conducted among 1390 respondents in 52 market hubs in Lusaka and Central province of Zambia.
  • The researcher finds a tax compliance rate of on average 30 percent among these MSMEs.
  • The findings reveal several key barriers to tax compliance among this group: MSMEs report low business profitability and high tax rates as key individual barriers to compliance; these businesses also report facing intractable logistics to paying taxes to the Zambia Revenue Authority (ZRA); perceived and actual levels of audit are low with only 7.4 percent of MSMEs having ever been audited for compliance; MSMEs have negative perceptions about what revenue collected by the state is used for further dampening the desire to comply.
  • The author makes several policy recommendations for improving compliance among MSMEs.