THE EXTENT TO WHICH TAX COMPLIANCE INFLUENCES THE PERFORMANCE OF SMES IN CENTRAL EQUATORIAL: A CROSS SECTIONAL STUDY.

Abstract

Background:

This study aims to establish the extent to which tax compliance influences the performance of SMEs in Central Equatorial. 

 Methodology:

The study adopted the descriptive study design based on the quantitative and qualitative approaches. The study population of 5,573 registered SMEs in the Central Equatorial will be used to select a sample size of 291 SMEs using simple random sampling. Data was collected using the self-administered questionnaire and interview guide. The Statistical Package for Social Sciences (SPSS), was used to analyze quantitative data while qualitative data shall be analyzed using thematic analysis.

 Results:

78.5% were males while the females constituted 21.5%. The study determined the extent to which tax compliance influences the performance of SMEs in Nakawa Division, Kampala. The study findings revealed that tax compliance significantly affects the performance of SMEs in the Nakawa division since the p-value (.000) is less than the significance level. The correlation coefficient is (0.595) which implies that there was a moderate positive relationship between tax compliance and the performance of SMEs. Therefore, according to the results, tax compliance has a statistically significant moderate positive effect on the performance of SMEs which confirms the hypothesis stated above. 

 Conclusion:

 “The simplified system of taxation, tax planning, and functional expertise, interpretation of tax laws and regulations play a fundamental role in enhancing the performance of SMEs.” This implies that strengthening the system of taxation through a simplified system of taxation can support SME taxpayers to meet their tax duties and thus reduce the burden of tax compliance within SMEs

Recommendation:

Uganda’s, primary consideration should be given to strengthening the system of taxation through having a simplified system of taxation that can support SME taxpayers to meet their tax duties and thus reduce the burden of tax compliance within SMEs.