Fear Or Fairness? Enforcement, Trust, and Tax Compliance in Tanzania’s Urban Informal Sector.

Abstract

This paper investigates the determinants of tax compliance among retail traders in Kinondoni Municipality, Dar es Salaam, Tanzania. It does so through the lens of the Slippery Slope Framework. Drawing on survey data from 216 traders and complementary qualitative interviews, the study applies a mixed-methods approach to examine how enforcement, trust, procedural accessibility, and institutional fairness shape compliance behaviour. Logistic regression and mediation models reveal that tax knowledge significantly predicts compliance but operates indirectly through increased awareness of enforcement risks. However, high compliance costs, opaque procedures, and digital access barriers— especially among women and less-educated traders—undermine voluntary engagement. Trust in tax authorities, shaped by respectful treatment and perceived service reciprocity, emerges as a crucial driver of relational compliance. The findings challenge deterrence-centred models by showing that sustainable tax compliance depends not only on state capacity to punish but also on its ability to build legitimacy. The paper contributes to development policy by positioning tax behaviour as a negotiated outcome embedded in everyday governance encounters, shaped by traders’ shifting perceptions of state authority—whether rooted in fear or fairness.