The Effect of Taxation on the Performance of Small Scale Businesses in Uganda Case Study: Kayabwe Trading Centre

Abstract

The general objectives of this study are to examine the effect of taxation on the performance of small scale businesses taking a case study of Kayabwe trading centre with sample size of 40respondents.

Specific objectives of the study are; to examine the effect of taxation on the performance of small scale businesses as well as the relationship between the performances of small scale business and taxation. The study traced whether the small scale businesses are aware of their tax obligations and also identifies problems which affect the small scale businesses in regards to taxation.

Both qualitative and quantitative research approaches were applied in the study, the research methods where direct interviews and questionnaires were used during the findings. Data was collected from primary and secondary sources and processed, analyzed using formal tables and narrative text to find out the effect of taxation and the performance of small scale businesses. The study indicates that the performance of small scale business is affected by stock levels, little capital employed to start the business, business daily expenses, business daily sales and high amount of taxes paid annually by the business proprietors.

The findings revealed that majority of business proprietors are aware of the form of taxes charged on their businesses and are uncertain of the mode of tax assessment though most of these small scale business owners were given little or even no assistance as regards tax awareness by the Uganda Revenue Authority (URA) or tax officials.

The study further revealed the problems faced by the small scale businesses as regards to tax collections and mode of tax assessment this could be due to inefficiency by tax authority which results to loss of stock and business capital investment causing inconvenience in business operation, reduction in business profit and sales, loss of business assets as a result of high taxes imposed on these small scale businesses.

The study concluded that different forms of taxes charged on small scale businesses (SSBs) annually contributed significantly to the poor performance of businesses in Kayabwe trading centre. Basing on the findings, the recommendations on the effect of taxes include; government through the ministry of finance planning and economic development call for workshops, seminars, radio programs to educate the business community about the different forms of taxes imposed on small scale businesses, tax authority should effectively carry out staff training to improve the mode of tax assessment, methods of collecting the taxes should be improved by employing qualified officials and simplify taxes levied on small scale businesses. Continue to improve customs administration through clearance procedures, fair treatment of business proprietors, conduct formal market or social research surveys on small scale business to gather information on taxation feedback by tax authority. Lastly small scale businesses should be given enough time to pay up their tax obligations rather than demanding for payment spontaneously.

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