THE ANATOMY OF TAX EVASION ANDTAX MORALE: LESSONS FROM TAX THEORIES, TAX AUDITS AND SURVEYS IN ZIMBABWE .

Abstract

Tax evasion is a serious developmental issue in many developing countries. Efficient tax collection is critical for the building and maintenance of public infrastructure. The purpose of the paper was to examine factors that encourage tax evasion in Zimbabwe using evidence from tax audits and theory. The findings show that tax morale, tax administration inefficiencies, taxpayer attitude, existence of shadow economy, ineffective tax audits, high marginal tax rates, corruption and lenient penalties are some of the major factors that causes tax evasion in Zimbabwe. The study recommends the adoption of policies that encourage high tax morale such as making tax design systems less complex, using tax revenues efficiently in order to encourage positive attitude and trust in the government. Stringent penalties, long jail terms, forfeiture of tax evasion rentals should be made mandatory for those caught evading and also to deter would be tax evaders. Making tax audits effective and efficient in order to reduce the perception of unfairness, progressively reducing tax rates and gradually automating tax systems to minimise human interface are some of the policies that can be used to reduce incidences of tax evasion in developing countries. Data was collected using surveys of 100 individuals, firms as well as finding from tax audits. The contribution of this study is the use of binary choice models to analyse factors that contributes to the probability of tax evasion.