Tax knowledge, perceived tax fairness and tax compliance in Uganda: the case of small and medium income tax payers in Kampala Central Division
The study examined the relationships between tax knowledge, perceived tax fairness and tax compliance of small and medium enterprises. It was prompted by the stagnated revenue collection efforts in Uganda amidst a taxpayer environment characterized by the poor tax compliance culture, low levels of tax knowledge with overly complicated and inequitable tax laws. The study adopted a cross-sectional research design, combined with qualitative (analytical and explanatory) and quantitative (descriptive and inferential) research designs. The study considered tax registered small and medium enterprises within the Central Division of Kampala District who constituted the population of study. The sample size of the study was 330 respondents and self administered questionnaires were used to collect data from the SMEs’ owners or managers. The study found out that, tax knowledge and perceived tax fairness had a causal relationship with tax compliance. Tax knowledge was found to have a positive and significant relationship with tax compliance as well as perceived tax fairness did with tax compliance. However, the relationship between tax knowledge and perceived tax fairness was found to be weak. These findings imply that positive improvement of taxpayers’ knowledge and perceptions of fairness about taxes will lead to improved tax compliance. From the findings, it is recommended that much emphasis should be put to dissemination of concrete tax knowledge (technical knowledge) when conducting tax education. Furthermore, government should improve its service provision and accountability for the taxpayers to perceive an equitable exchange with government. If URA and government adopt this stand, the tax system is likely to be understood better and perceived as being fair.