Tax awareness and tax compliance of Small and Medium Enterprises (SMEs) in Nakawa Division

Abstract

The study investigates the relationship between tax awareness and tax compliance among Small and Medium Enterprises in Nakawa Division so that tax compliance can be improved. The Specific objectives were; to establish the effect of taxpayer’s education/knowledge on tax compliance among SMEs in Nakawa Division, to examine the effect of tax awareness campaigns on tax compliance among SMEs in Nakawa Division and to examine the effect of religiosity (tax morals/ethics) on tax compliance among SMEs in Nakawa Division. The research design was a cross sectional with a quantitative approach. Data was collected using stratified random sampling method, by distributing questionnaires to SMEs in Nakawa Division. The study population involved wholesalers, retailers and service providers with a population of 750 and a sample of 256 respondents. Data was analyzed through the use of SPSS Version 19. The findings showed that, there was positive relationship between taxpayer’s education/ knowledge and tax compliance, a significant positive relationship between tax awareness campaigns and tax compliance and a significant positive relationship between religiosity (tax morals/ethics) and tax compliance among Small and Medium Enterprises in Nakawa Division. This implies that tax awareness is a critical predictor of tax compliance. The researcher made the following conclusion. The more effective implementation of the taxpayer’s education/knowledge, tax awareness campaigns and changing taxpayers’ attitude towards tax system, the higher the tax compliance will be among the SMEs in Nakawa Division. The researcher recommends that, tax authority should simplify the taxation process through improved tax education, improved tax awareness campaigns as this will help to change Small and Medium Enterprises’ attitude (morals/ethics) towards the tax system hence comply with tax laws and regulations.