The effect of taxation on the performance of small and medium enterprises

Abstract

The study was carried out to find out the effect of taxes on performance of small and medium enterprises in Uganda (SME’s), taking a case study of Ntinda in Kampala district. The study aimed at assessing the performance of business enterprises in Kampala district, finding out if tax payers are aware of all their tax obligations, policies and problems affecting them as well as their businesses. The study applied both qualitative and quantitative research designs where questionnaires were used. Data was collected from both primary and secondary sources. Data was processed and analyzed using formal tables, pie charts, narrative text, and correlation to find out the relationship between the effect of taxes and performance of small and medium enterprises. A total of 50 respondents were considered out of the entire population in Ntinda. The findings indicated that the performance of SME’s is affected by daily expenses, daily sales and the average amount of taxes paid annually. Most business owners weren’t registered for tax purposes and they don’t file income tax returns. The findings revealed that the clientele and assets of most SME’s hadn’t increased. It was however revealed that businesses translate sales target into market share. Recommendations on effects of taxes included; educating the business community about its different tax rates, SME’s should make a body and invite the URA to sensitize members, SME’s should be revised and made fair so that they can have a chance on running their businesses making them profitable and giving them a going concern.