Wadesango N, Gift Chirebvu
The stimulants for the the growth and spread of value-added tax (VAT) remains unclear both theoretically and empirically. small and medium enterprises (SMEs) are experiencing challenges with respect to complying with the VAT requirements. Unfortunately, there is little researches that have focused on understanding how VAT really affects the operations of SMEs. This study therefore sought to determine the factors that affect VAT compliance; identify the VAT collection methods; determine how VAT is affecting the operations and profits of the firms; and describe the status of VAT compliance among SMEs in this developed country which shall be referred to as country A. Structured survey questionnaires were distributed to conveniently sampled 50 owners and managers of the firms and a response rate of 76% was recorded. Results indicated that VAT compliance is affected mainly by characteristics of the individuals, features of the VAT system itself, and environmental factors such as political and socio-economic situation in this developed country. The non-compliance among most SMEs is a measure to survive the harsh economic conditions. The high costs of implementing such a complex system is so high for SMEs that an attempt to comply predict the folding up of that small business.