The Effect of Tax Education on Tax Compliance in Small Medium Sized Enterprises in Uganda Case Study: Mbarara District

Abstract

The study was carried out to find out the effect of tax education on tax compliance of small and medium enterprises in Uganda (SMEs), taking a case study of Mbarara District.

The study aimed at examining the various tax education approaches employed by URA, examining the level of tax compliance of small and medium- sized enterprises in Uganda, establishing the relationship between tax education and tax compliance SMEs in Uganda.

The concept of tax education was limited to tax seminars, tax clinics, tax training schools and media campaigns, while tax compliance was limited to returns submitted, voluntarily registration, accuracy of return and frequency of files returned.

The study applied both qualitative and quantitative research designs where questionnaires were used which had both open ended and closed ended questions. Data was collected from both primary and secondary sources. Data was processed, analyzed and separated before discussions, formal tables, narrative text were used. A total of 50 respondents were considered out of the entire population in the District of which the majority were SME tax payers and a simple random sampling method was used in selecting the respondents.

The findings indicated that tax education affects tax payers through the various tax education approaches employed by URA that included, media campaigns, tax seminars, tax training schools, tax clinics of the respondents were aware about.

Most small medium sized enterprises are compliant to their tax obligation, this was through number of files submitted, frequency of filing returns, accuracy of files returned, voluntary registration.

The study further indicated that there was a positive relationship between tax education and tax compliance on SMEs in Uganda which was acceptable. The findings revealed other approaches that were considered relevant in improving the level of tax compliance of SME taxpayers of which included; URA should encourage more face to face encounters with tax payers, Accountability by concerned parties and monthly publications on taxes.

Recommendations on the effect of tax education on tax compliance of SMEs include; The URA should reach out and educate the business community about its different tax rates and mode of payment, improvement on the method of collecting taxes. Well trained sales and trained personnel and advanced technology to lease payment of tax charges. Give subsidiaries to bigger small enterprise especially dealing in essential needs.

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