A Study of the Factors Affecting Rental Income Tax Administration Effectiveness in Zambia

Abstract

Even the largest tax plan in the world is useless if it is not implemented well. Efficient tax administration ensures a high level of tax compliance. However, measuring the effectiveness of tax administration based solely on the amount of taxes collected is overly simplistic. Instead, a much stronger criterion for assessing the effectiveness of tax administration is taking into account the size of the compliance gap. The goal of this study is to determine the effectiveness of rental income tax administration by examining the characteristics of the tax system that influence it, such as diversity, equality, convenience, simplicity, and security. Both primary and secondary data were used in this study. Primary data was collected from taxpayers in Kabulonga Main, Lusaka, while secondary data was collected from various sources including the Zambia Revenue Authority, State Valuation Department, Lusaka City Council, and selected real estate agencies. Descriptive statistics were used to analyze the data. The study aimed to determine whether taxpayers' perceptions of the characteristics of the tax system, as identified in the theoretical and empirical literature, could influence the effectiveness of the administration of the rental income tax. The Zambia Revenue Authority was found to have perpetuated phenomena that encourage non-compliance behavior among aggrieved taxpayers, which was indirectly used as a measure of tax administration effectiveness in this study. The results showed that the characteristics of the tax system, particularly equality, diversity, convenience, simplicity, and security, have a positive impact on the effectiveness of tax administration. Based on these findings, the study recommends that the Zambia Revenue Authority work more closely with all stakeholders, incorporate user-friendly features into its tax filing website to promote inclusivity and compliance, improve the authority's ethical profile, increase taxpayer trust in the system, and reduce the tax rate on rental income to alleviate the tax burden. Additionally, active taxpayer education and enforcement of tax laws and policies should be implemented to reduce tax evasion and improve tax compliance.