The influence of taxation practices on small scale business performance in Mukono municipality

Abstract

The study examined the influence of taxation practices on small scale business performance in Mukono municipality. It was guided by three research objectives which were; examined the taxation practices used that influence the performance of small scale businesses in Mukono municipality, the challenges faced by small scale businesses in meeting their tax obligations in Mukono municipality and established the taxation practice strategies that can be adopted to improve business performance in Mukono municipality. The study used a cross sectional survey design with quantitative techniques. The study population involved Business owners or directors and business employees of small scale businesses. Data was collected using questionnaires and interviews. In data analysis percentages, means, correlations and regressions were used to analyze data. Findings revealed a positive significant relationship between taxation practices and small scale business performance in Mukono municipality (r=0.579, p=0.00). It was further revealed that the tax practices used are not transparent and fair, tax evaluation process are not fair, taxes levied on businesses are not affordable and the tax collection methods used are not fair. It was revealed that the key challenges faced by small scale businesses in meeting their tax obligation is that the tax rates are very high, business people pay so many types of taxes that drain businesses, there is difficulty in accessing tax information for the actual and accurate amount supposed to be paid annually and that law enforcement officers ask for bribes in the process tax enforcement. Findings also revealed that as strategies to improve tax collection and business performance in Mukono municipality, there is need to introduce a self-assessment tax system where business are able to self-assess and accurate figures are used to levy taxes, increase information availability on the different forms of taxes and how to calculate or compute such taxes. I therefore concluded that the current tax practice allows taxes paid based on the business type rather than returns which is harmful for small business growth, there is difficulty in accessing tax information on the accurate annual payable taxes. It was therefore recommended that there is need to improve on tax information availability for all small business to understand how much taxes are payable annually per each type of business and also introduced self-assessment systems.