The Effect of Tax Education on Tax Compliance of Small and Medium Enterprises Case Study in Rubaga Division

Abstract

The study was about the effect of Tax Education on Tax Compliance of small and medium enterprises, case study was small and medium enterprises in Rubaga division, Mengo. The general objective was to analyze the relationship between tax education on tax compliance of SMEs. The specific objectives were; to determine the effect of tax awareness on tax compliance of SMEs, to establish how tax assessment system affects tax compliance of SMEs and to find out how tax complexity impacts on tax compliance of SMEs.

The research employed a cross sectional research design which was descriptive in nature basing on different scholars literature. Data collected was mainly from the field using questionnaires and interview guide. Data was summarized, coded, edited and also analyzed using SPSS 16.0. Findings revealed that tax awareness, tax assessment system has a positive relationship with tax compliance. Most respondents agreed that sensitization of tax payers encourages them to comply and pay taxes. The study showed that there was a positive relationship between tax assessment and tax compliance. Most respondents agreed that SAS enabled them to comply and pay taxes. The study also revealedthat there is a relationship between tax complexity and tax compliance. The respondents agreed the more complex the tax laws, the more people failed to comply. The findings revealed that there is a positive and significant relationship between tax education and tax compliance. Thisis evidenced by a correlation analysis of (r=0.989, p<0.01) which showed a strong and positive relationship.

Recommendations on tax education were that the local tax revenue authority should adopt a more pro-active approach rather than reactive approach in trying to sensitize the taxpayers. This would go along in minimizing administrative and compliance costs since voluntary compliance will be enhanced through this sensitization programs, improvements should be made in the assessment of taxpayers, transparency, fairness and well stipulated guidelines should be followed by staff of URA, sensitization of taxpayers regarding the importance of paying taxes, quality and timely information should be availed to taxpayers and also encourage feedback from the taxpayers. Therefore there is need for the tax authority to improve on the tax education methods and policies of sensitizing taxpayers to strengthen compliance.

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