The Informal Sector, the “implicit” Social Contract, the Willingness to Pay Taxes and Tax Compliance in Zimbabwe

Sebele-Mpofu Favourate Y ()
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Sebele-Mpofu Favourate Y: Accounting, Faculty of Commerce, National University of Science and Technology, 15 Redrobin, Burnside, Bulawayo, Zimbabwe

Accounting, Economics, and Law: A Convivium, 2023, vol. 13, issue 3, 299-342

Abstract: The growth of the informal sector in African countries has largely been viewed as an escape from regulation and deliberate intention to avoid paying taxes and these views have been widely popularised, ignoring significant details to the disadvantage of realistic tax policy design. Zimbabwe adopted a presumptive tax system for various informal sector categories to enlarge the tax base and increase tax revenues mobilised. However, presumptive taxes have not generated significant revenue. Tax compliance in the informal sector has often been studied from the tax structure design, the deterrence model perspective and capacity limitations without paying adequate attention to tax morale. Tax morale can be denoted through the peer effect of the compliance behaviour of other taxpayers, the fulfilment of the psychological social contract, transparency and accountability in the use of tax revenues as well as stakeholder communication, built on mutual trust and respect. In light of these tax morale dimensions, it is evident that tax compliance can never be divorced from the intrinsic motivation to pay taxes. The inextricable link, between tax evasion, tax compliance and tax morale, motivates this study. While previous studies on tax morale have applied single method research approaches, this study adopted a sequential exploratory mixed method research design, combining both qualitative and quantitative (through the use of document reviews, semi-structured interviews and questionnaires) in order to bring a balanced view. The study found out that tax morale was a strong driver of tax evasion and non-tax compliance in the informal sector.

Keywords: informal sector; tax morale; presumptive tax; tax compliance; deterrence (search for similar items in EconPapers)
JEL-codes: A14 B22 B55 (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1515/ael-2020-0084

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