Factors affecting tax compliance among SMEs in Uganda: a case study of Kikuubo in Kampala

Abstract

Tax compliance and low tax revenues are the major concerns retarding economic growth in most developing countries, mainly Sub-Saharan African countries including Uganda. The two work together to keep developing countries in a state of quagmire and there is urgent need for efforts aimed at rectifying the anomaly if developing countries like Uganda is to achieve here goals of reaching a middle income state by 2040. The major objective of the study was to assess the factors affecting tax compliance among SME’s in Uganda a case study of Kikuu Kampala. A cross-sectional research design was used and data was collected from 99 traders in Kikuubo, Kampala using a closed ended questionnaire. The analysis was done at three levels namely; univariate, bivariate and multivariate levels with 95% level of confidence. The study found that years in business, source of income, tax rates and knowledge of tax rules and regulations in the country significantly predicted tax compliance among SMEs in Uganda. Where traders who; spent 6-10 years in business, got their incomes from wholesale business and monthly salaries, were more likely to comply tax payment by declaring their incomes to URA. Alternatively, traders who; believed the tax rates were very high, were not aware of tax rules and regulations in the country were less likely to comply tax payment by declaring their incomes with URA.The study found out that knowledge of tax rules and regulations has a bearing on tax compliance where; majority (52.24%) of those who were aware of the tax rules complied while majority (68.75%) of those who were not aware did not comply. This implies that traders who aware of the rules and penalties of non compliance to declare all incomes were more willing to pay than those who were not aware. (p=0.000<0.05). There is thus need for the Ugandan government to device amicable, convenient, time saving, and simplified methods of tax collection/ payment so that tax payers can pay their dues with ease and minimum costs. This will reduce on the level of tax evasion in the country.