Adoption of new digital tax compliance technologies among Small scale traders: case study of Kikubo Market

Abstract

The rapid digitalization of tax administration in Uganda, particularly through Uganda Revenue Authority (URA) initiatives such as the Electronic Fiscal Receipting and Invoicing System (EFRIS) and the e-tax platform, has introduced new opportunities and challenges for small-scale traders. Despite these reforms, tax compliance among small enterprises remains sub-optimal, with limited adoption of digital tools hindering efficiency, transparency, and revenue collection. This study examined the factors influencing the adoption of digital tax compliance technologies among small-scale traders in Kikubo Market, Kampala, focusing on the role of the regulatory environment, digital literacy, and the relationship between technology adoption and tax compliance. Using a descriptive, mixed-methods research design, data were collected from 102 traders through structured questionnaires and key informant interviews. Quantitative data were analysed using descriptive statistics and binary logistic regression, while qualitative data were analyzed thematically. The findings revealed that 70.4% of traders had adopted at least one URA digital tax platform. The regulatory environment had a positive and significant effect on adoption, with improvements increasing the likelihood of adoption by approximately 11 percentage points. Digital literacy emerged as the strongest predictor, where higher online access skills increased adoption probability by over 21 percentage points. Education level and years of business operation also significantly influenced adoption. Conversely, low sales turnover, limited ICT skills, and complex system navigation were major barriers. The study further found a strong positive relationship between the adoption of digital technologies and tax compliance, demonstrating that traders who used digital tax tools were more timely, accurate, and consistent in meeting tax obligations. Qualitative findings highlighted additional challenges including inadequate sensitization, high compliance costs, poor internet connectivity, and fear of increased tax liability. The study concludes that enhancing digital literacy, improving regulatory support, and simplifying URA digital systems are critical for increasing adoption and improving tax compliance. It recommends targeted capacity-building programs, tailored outreach for less digitally skilled traders, infrastructure improvements, and policy adjustments to reduce compliance burdens for small-scale traders. Strengthening these areas will improve tax administration, broaden the tax base, and support Uganda’s transition toward a digitally driven and transparent revenue system

Subject Keyword: Digital tax compliance technologies; Small scale traders; Kikubo Market