The impact of taxation on the development of small scale business in Busolwe Town Council, Butaleja District
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Date
2018-09
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Kampala International University, College of Humanities and Social Sciences
Abstract
The study was designed to establish the impact of taxation on small scale business in Busolwe
Town Council in Butaleja District in Eastern Uganda. The objective of the study included: to
establish the types of taxes paid that small scale businesses are required to pay to analyze the
effects of the taxes levied on small, scale businesses and to analyze the challenges faced by small
scale businesses in paying taxes in Busolwe Town Council. Simple random sampling and
purposive sampling was used to collect data. The sample size was drawn from three wards in the
council which include: Busolwe central, Zebra, and Dundo. Forty (40) respondents were
interviewed by the use of questionnaires and interview guide these where used to gather primary
data. Data presentation and analysis was done in tabula format using numbers and percentages
and description was used in analysis to supplement on what is in the tables. The study revealed
that reduction in profits were as a result of high taxes imposed on small scale businesses where
what they gain out of sales as profit is spent on clearing tax dues and thus little is saved to add
stoke in their business, The investment decisions of small scale businesses are equally influenced
by tax levied in that when tax charged seem to be low traders save much more than when tax
levied on the business is high which fetches them less profit. The study established that most
small business is family run thus making them depart from the objectives of the businesses. The
existence of lack of tax education leads to non-compliance among taxpayers arising from
multiple taxes imposed on the business taxpayers that makes them not to appreciate taxes levied.
In conclusion according to researcher findings, low tax ra e policy is an instrumental to the
survival and growth of small businesses. However, the best talK policy that suit SMEs encourages compliance and should be lower for both compliance costIand administrative cost to reduce uncertainty faced by tax payers to improve on their compliance and should be designed in such a
way that should not affect taxpayers business expansion and growth.
According to the established findings the researcher recommended tax collection be defined with
respect to which the government should collect certain tax from small businesses, and tax be
collected in relation to the size, ability to pay including location. Tax policies should be designed
in such a manner that it will encourage potential taxpayers, voluntary compliance and ultimately
lead to business interest of small business persons in Busolwe Town Council.
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Keywords
Taxation, Development of small scale business