Analysis of presumptive tax compliance among small businesses in Uganda: Case study of Kampala Capital City Authority

Abstract

The purpose of the study was to analyze presumptive tax compliance among small businesses in Uganda using a case study of Kampala Capital City Authority. It was guided by three study objectives which included to identify the enforcement mechanisms used in promoting presumptive tax compliance in Kampala Capital City Authority, to analyze the effectiveness of enforcement mechanisms used in promoting presumptive tax compliance in Kampala Capital City Authority and to determine the key factors contributing to low level of presumptive tax compliance in Kampala Capital City Authority. A cross-sectional survey design was employed to collect primary data using self-administered questionnaires. Data was gathered using a structured questionnaire from 126 respondents. Interviews were also used to collect qualitative data from some of the informants. The data was analyzed using descriptive and presented in form of tables and charts. The study found out that a number of mechanisms are used to ensure tax compliance including audits and inspections, imposing penalties and fines, requiring comprehensive information reporting from taxpayers, withholding taxes at the source, cross-checking taxpayer data from multiple sources, use of third-party reporting and employing technology for real-time monitoring of financial transactions as most of the respondents agreed. On effectiveness of enforcement mechanisms used in promoting presumptive tax compliance, responses indicate that most of measures used are too effective as most of them noted that it is fair and just, it is straightforward and manageable among others. However, issues like limited financial resources for tax compliance efforts hinder effective enforcement and inadequate record-keeping practices among taxpayers pose a challenge to accurate tax enforcement among others make presumptive tax compliance a challenge. The study recommended that governments should prioritize regular audits and inspections as a fundamental strategy to uphold tax compliance standards, there is need to consider revising and enforcing penalty structures to ensure they are proportionate to the severity of the offense. There is need to streamline and simplify tax regulations to reduce complexity and make it easier for taxpayers to understand and comply. Clear tax laws can help alleviate the burden of compliance and encourage voluntary adherence to the taxes.