The Effects of Tax Compliance On Small and Medium Enterprises a Case Study of Hoima Minicipality's Industrial Area

TABLE OF CONTENT

DECLARATION ............................................................................................................................ ii

DEDICATION ............................................................................................................................... iii

APPROVAL. .................................................................................................................................. iv

ACKNOWLEDGEMENT .............................................................................................................. v

TABLE OF CONTENT ................................................................................................................. vi

LIST OF TABLES .......................................................................................................................... x

LIST OF FIGURES ........................................................................................................................ xi

ABBREVIATIONS AND ACRONYMS ..................................................................................... xii

ABSTRACT ................................................................................................................................. xiii

CHAPTER ONE ............................................................................................................................ 1

INTRODUCTION ......................................................................................................................... I

1.0 Introduction ............................................................................................................................... 1

Ll Back ground to the study ........................................................................................................... 1

1.1.1 Historical perspective ............................................................................................................. I

1.1.2 Theoretical Perspective .......................................................................................................... 4

1.1.3 Conceptual Perspective .......................................................................................................... 5

1.1.4 Contextual Perspective ........................................................................................................... 6

1.2 Statement of the Problem .......................................................................................................... 6

1.3 Purpose of the study ........................................................................................ _ ..................... 7

1.4 Objectives of the Study ............................................................................................................. 7

1.5 Research Questions ................................................................................................................... 7

1.6 Scope of the study ..................................................................................................................... 8

1.6.1 Content scope ......................................................................................................................... 8

1.6.2 Geographical scope ................................................................................................................ 8

1.6.3 Time scope ............................................................................................................................. 8

1.7 Significance of the study ......................................................................................................... 8

1.8 Limitations of the study ............................................................................................................ 8

1.9 Conceptual Frame work .......................................................................................................... 10

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CHAPTETR TWO ...................................................................................................................... 11

LITERATUREREVIEW ........................................................................................................... 11

2.0 Introduction ............................................................................................................................. 11

2.1 Definition of Tax Compliance ................................................................................................ 11

2.1.1 Small a.'1d Medium Enterprises ............................................................................................ 12

2.2 Theoretical Framework ........................................................................................................... 15

2.2.1 The Tax Morale Theory ....................................................................................................... 15

2.3 Tax Rate and tax compliance among SMEs ........................................................................... 16

2.4 Tax Information available and compliance among SMEs ...................................................... 17

2.5 Taxpayer's Attitude and Tax compliance -····-··············-··-···-······················-····················18

2.6 Summary of literature review .................................................................................................. 20

CHAPTER THREE .................................................................................................................... 21

RESEARCH METHODOLOGY .............................................................................................. 21

3.0 Introduction ............................................................................................................................. 21

3.1 Research design ....................................................................................................................... 21

3.2 Target population .................................................................................................................... 21

3.3 Sample size ....................................................................... - ..................... - ... - ..................... 22

3.4 Sa.'11pling technique ................................................................................................................. 22

3.5 Data Source ............................................................................................................................. 22

3.6 Data Collection Instruments .................................................................................................... 23

3.6.1 Interviews: ............................................................................................................................ 23

3.6.2 Questionnaires ...................................................................................................................... 23

3.6.3 Observation .......................................................................................................................... 23

3.7 Data processing and analysis .................................................................................................. 23

3.8 Validity of Research Instruments ............................................................................................ 23

3.9 Measurement of Variables ...................................................................................................... 24

3.10 Reliability of research Instruments ....................................................................................... 24

3 .1.1 Ethical Considerations ......................................................................................................... 2 4

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CHAPTER FOUR ....................................................................................................................... 25

DATA ANALYSIS, PRESENTATION AND INTERPRETATION ...................................... 25

4.0 Introduction ............................................................................................................................. 25

4.1 Response Rate ......................................................................................................................... 25

4.2 Demographic infonnation ....................................................................................................... 27

4.2.1 Age ofBusiness ...........•.•......•.•..........................•..........................• - .................................... 27

4.2.2 Type of business activity ...................................................................................................... 28

4.2.3 Monthly turnover ................................................................................................................. 29

4.2.4 Personal Identification Number ........................................................................................... 29

4.3 Tax rates .................................................................................................................................. 30

4.3.1 SMEs Perception of Ugandan tax rates ................................................................................ 30

4.32 SMEs Perception of the different types of taxes .................................................................. 31

43.3 Tax amount payable as a factor influencing SMEs tax compliance ..................... ·-···-······ 31

4.4 A vai!ability of Tax Infonnation .............................................................................................. 32

4.4.1 Ready availability of Information ........................•......................•........•............................... 32

4.4.2 How tax information affects SMEs tax compliance ............................................................ 32

4.4.3 Correct calculation of taxes based on available information ............................................... 33

4.5 SMEs attitude about tax .......................................................................................................... 34

4.5.1 Access to public utilities and services .................................................................................. 34

4.52 Value the company places on payment of taxes .................................................................. 35

4.5.3 Respondents view on the value other SMEs places on payment of taxes ............................ 35

4.5.4 Improving Ugandan tax system ........................................................................................... 36

4.5 Summary ................................................................................................................................. 3 7

CHAPTER FIVE ......................................................................................................................... 38

SUMMARY OF THE FINDINGS, CONCLUSIONS AND RECOMMENDATIONS ........ 38

5. 0 Introduction ............................................................................................................................. 3 8

5.1 Summary of findings ............................................................................................................... 38

5.1.1 Taxrates ............................................................................................................................... 38

5.12 Availability of tax infonnation .................................................................... ·-··-··············· 3 8

5.1.3 Taxpayers Attitude towards tax ........................................................................................... 39