THE IMPACT OF TAXATION ON THE DEVELOPMENT OF SMALL SCALE BUSINESSES IN BUSOLWE TOWN COUNCIL, BUTALEJA DISTRICT

TABLE OF CONTENTS

DECLARATION

APPROVAL

DEDICATION

ACKNOWLEDGEMENT iv

ABBRIVIATION v

TABLE OF CONTENTS

LIST OF TABLES ix

ABSTRACT

CHAPTER ONE 1

INTRODUCTION 1

1.0 Introduction i

1.1 Background to the study 1

1.2 Statement of the problem 2

1.3 Purpose of the study 2

1.4 Objective to the study 3

1.5 Research questions 3

1.6 Scope of the study 3

1.6.1 Content scope 3

1.6.2 Time scope 3

1.6.3 Geographical scope 3

1.7 Significance of the study 3

1.9 Definition of key terms s

CHAPTER TWO 7

LITERATURE REVIEW 7

2.0 Introduction 7

2.1 The concept of taxation 7

2.2 Classification of taxes 7

2.3 The purpose of taxation 8

2.5 The impact of Taxation on small scale businesses 9

2.7 Summary 12

CHAPTER THREE .13

METHODOLOGY 13

3.0 Introduction 13

3.1 Research design 13

3.2 Area of study 13

3.3 Study population 13

3.4 Sample size 13

3.5 Sampling procedures! Strategies 14

3 .6 Methods and Instruments of Data collection 14

3.6.1 Survey 14

3.6.2 Interviews 14

3.6.3 Observation 15

3.8 Data Analysis and Processing is

3.9 Data Presentation 16

3.10 Reliability and validity of study variables 16

3.11 Ethical considerations 17

CHAPTER FOUR 18

FINDINGS AND INTERPRETATIONS 18

4.0 Introduction 18

4.1 Democratic characteristics 18

4.1.1 Table 1 Showing Demographic characteristics of respondents 19

Table 2 below shows whether taxes are a compulsory payment for all retail business or not in Busolwe town council 20

4.1.3 Table 3. Showing how taxation affect business in Busolwe town council 21

4.1.5 Table 5. Showing assessment of small business in Busoiwe town council for tax purposes .... 22

4.1.6 Table 6 showing the number and percentage change of respondents on getting assistance out of the tax they pay 22

4.1.7 Table 7 showing the how long different small scale business men been paying tax and their response to tax charges 23

Table 8 showing response on how taxation affects saving rate of small business in Busolwe town council and how they often save 24

Table 9 showing impact of taxation on investment decisions of small business in Busolwe town council 25

REFERENCES .38

APPENDICES .41

APPENDIX I: QUESTIONNAIRE TO BUSINESS PROPRIETORS 41

ABSTRACT 

The study was designed to establish the impact of taxation on small scale business in Busoiwe town council in Butaleja District in Eastern Uganda. The objective of the study included: to establish the types of taxes paid that small scale businesses are required to pay to analyze the effects of the taxes levied on small, scale businesses and to analyze the challenges faced by small scale businesses in paying taxes in Busoiwe town council. Simple random sampling and purposive sampling was used to collect data. The sample size was drawn from three wards in the council which include: Busolwe central, Zebra, and Dundo. Forty (40) respondents were interviewed by the use of questionnaires and interview guide these where used to gather primary data. Data presentation and analysis was done in tabula format using numbers and percentages and description was used in analysis to supplement on what is in the tables. The study revealed that reduction in profits were as a result of high taxes imposed on small scale businesses where what they gain out of sales as profit is spent on clearing tax dues and thus little is saved to add stoke in their business, The investment decisions of small scale businesses are equally influenced by tax levied in that when tax charged seem to be low traders save much more than when tax levied on the business is high which fetches them less profit. The study established that most small business is family run thus making them depart from the objectives of the businesses. The existence of lack of tax education leads to non-compliance among taxpayers arising from multiple taxes imposed on the business taxpayers that makes them not to appreciate taxes levied. In conclusion according to researcher findings, low tax rate policy is an instrumental to the survival and growth of small businesses. However, the best talK policy that suit SMEs encourages compliance and should be lower for both compliance cost I and administrative cost to reduce the uncertainty faced by tax payers to improve on their compliance and should be designed in such a way that should not affect taxpayers business expansion and growth. According to the established findings the researcher recommended tax collection be defined with respect to which the government should collect certain tax from small businesses, and tax be collected in relation to the size, ability to pay including location. Tax policies should be designed in such a manner that it will encourage potential taxpayers, voluntary compliance and ultimately lead to business interest of small business persons in Busoiwe town council.