Impact of taxes on performance of small scale business enterprises in central Uganda
Abstract
The purpose of the study was to evaluate the impact of taxes on the performance of small scale
business enterprises in Central Uganda, secondary data was used and a sample of 80 SMEs was
considered. Results showed that 59% of the SMEs had low performance and 41% had high
performance. The Pearson chi squared measure of association at 5% level of significance showed
that gender, level of experience, labour productivity, years spent running the business, tax
amounts, and tax types had a statistical significant relationship with performance. The binary
logistic results showed that the female managers /owners had less odds of having high
performance as compared to the male counterparts, respondents with more years of experience
had high odds of having high performance than those with less years, those with very efficient
worker had high odds of having high performance than those that were somehow, those who
spent 7 and more years running the business had high chance of having high performance than
those who have run 1-3 years, those that paid more tax had less odds of having a high
performance than those that paid less tax, and finally those that paid property tax had high odds
of having high performance than those that paid VAT
I recommend that URA should find a way of assessing the tax in that the small scale businesses
should pay early in the financial year in order to give enough time to the businesses to pay their
dues rather than make an assessment and demand for payment spontaneously. I also recommend
that the tax authorities should introduce a scheme that allows tax payers to pay the tax obligation
in the installments over a given period of time as opposed to lump sum at once.
URA should revise the amount of tax paid by small scale enterprises as it was revealed that small
scale enterprises are charged highly and should reach out and educate the business community
about its different tax rates and mode of payment. The study revealed that the biggest problem
with the tax paid is in fact that the small scale business community does not understand how the
tax is arrived at as well as how it is paid but not because it is too high.