Determinants of tax evasion in Uganda: a case study of Mirama Hills Border, Ntungamo District

Abstract

The study on the Determinants of Tax Evasion in Uganda taking a case study of Mirama Hills Boarder was carried out with the objectives of establishing the relationship between demographic factors and tax evasion, to find out the relationship between socio – cultural factors and tax evasion and to determine the relationship between economic factors and tax evasion. The study employed a cross-sectional design where data was collected from each respondent at a time. This type of design was adopted because it was cost effective, saves time and more information was collected in a relatively short period. The population for this study was revenue officials and traders at Mirama Hills Border – Ntungamo District and the study involved 109 respondents and data was collected using a questionnaires. The findings of the study at bivariate level revealed that demographic factors significantly affect tax evasion at Mirama Hills Border since p- value (.000) was less that the significance level and the correlation coefficient was (0.595) which implies that there is a moderate positive relationship between demographic factors and tax evasion. Therefore, according to the results, demographic factors have a statistically significant moderate positive effect on tax evasion. Thus the hypothesis: “there is no significant relationship between demographic factors and tax evasion” is rejected. Socio – cultural factors had a significant effect on tax evasion at Mirama Hills Border in Ntungamo District since the p – value (.000) was less than the significance level. The correlation coefficient (0.776) indicates a strong positive relationship between socio – cultural factors on tax evasion at Mirama Hills Border. Therefore, socio – cultural factors have a statistically significant positive effect on tax evasion which rejects the hypothesis that “there is no significant relationship between socio – cultural factors and tax evasion. Economic factors had a significant effect on the tax evasion since p – value (.000) was less than the significance level. The correlation coefficient (0.689) showed a strong positive relationship between economic factors and tax evasion hence economic factors have a statistically significant strong positive effect on tax evasion. Therefore the hypothesis “There is no significant relationship between economic factors and tax evasion” hence the hypothesis is rejected. The findings at multivariate analysis revealed that for demographic factors, each 1 unit improvement is associated with a 1.09 times greater likelihood of reduction in tax evasion. Similarly, socio – cultural factors are also associated with an increase of 1.18 times more likely to reduce tax evasion. Lastly, economic factors are 1.90 times less likely to impact on tax evasion. There was a significant relationship between the female gender and tax evasion. The females were 1.10 times less likely to evade taxes as compared to their male counterparts. Also people of the age above 60 years were 2.23 times less likely to evade taxes as compared to other age groups hence showing that old tax payers are more complaints as compared to young aged tax payers who are more likely to evade taxes. Basing from the study findings, the researcher recommended that there is need to sensitize young generation especially the youth to the dangers of involving in tax evasion because the study has revealed that there is a relationship between age and tax evasion whereby younger traders are more prone to tax evasion as compared to people of old age. Advocating for more female inclusion in cross border trade through creating a favorable environment by government to enable more women venture into trade since the study findings revealed that they are less likely to get involved in tax evasion as compared to their male counterparts. The aspect tax fairness should highly be put into consideration by Uganda Revenue Authority since perceived unfairness in taxes was found to be one of the drivers of tax evasion among others as detailed in body of this report.