Assessment of factors influencing tax compliance among small businesses enterprises: case study of Mbarara municipality

Abstract

Despite the government efforts through several tax reforms such as tax education and online tax services, non-tax compliance is still a challenge especially among individuals and small businesses. This study mainly assessed factors influencing tax compliance among small businesses in Mbarara Municipality. The study used a cross-sectional research design where a sample of 100 small businesses participated in the study. Data analysis was done at univariate, bivariate and multivariate using STATA version 1. Results showed that a higher proportion (58%) of businesses were not complying to taxes that is they were either not submitting all the tax returns in time or declaring all their incomes while accessing the tax dues of the business. At bivariate analysis, chi-square results showed that sex, education level, businesses annual turnover and number of employees significantly influenced tax compliance among small business in Mbarara municipality in that majority of the male owners/operators of the business, those that attained tertiary education, business that earned over 20 million annual turnover and those that employed at least one person were complying to taxes as compared to the rest. The significant factors were taken further analysis using binary regression, results revealed that businesses that were owned/operated by individuals that had attained tertiary education and those that earned 20 to 35 million annual turnover on average were more likely to comply to taxes as compared to those that had attained at most primary education and those earning 10 to 20 million turnover annually on average. The study recommends government and other stake holders collecting government revenue to create more awareness of the usefulness of fully paying taxes through tax education programmes in order to improve on the tax compliance among less educated. More so, there is need for more study on other factors that could be influencing tax compliance among small business such tax rate and tax compliance costs