Multiple Taxation and Profitability of Small Scale Business Enterprises in Hoima Municipality Mid-Western Uganda

TABLE OF CONTENTS

DECLARATION . i

APPROVAL ii

DEDICATION iii

ACKNOWLEDGEMENT iv

LIST OF TABLES v

LIST OF FIGURES vi

LIST OF ACRONYMS vii

TABLE OF CONTENTS viii

ABSTRACT xiii

CFIAPTER ONE 1

INTRODUCTiON 1

1 .0 Introduction 1

1 . 1 Background to the study 1

1.1 .1 Historical background Perspective 1

1 1 .2 Theoretical perspective 5

.1 .3 Conceptual perspective 5

1.1.4 Contextual perspective 7

1.2 Statement ofthe Probleim 7

1.3 Purpose of the study 8

1.4 Objectives of the study 8

1.5 Research questions 8

1.6 Research hypotheses 8

1.7 Scope of the study 9

VIII

1.7.1 Subject scope 9

1.7.2 Geographical scope .9

1.7.3 Time scope 9

1.8 Significance of the study 9

1.9. Operational definition of key terms 10

CHAPTER TWO 12

LITERATURE REVIEW 12

2.0 Introduction 12

2.1 Theoretical perspective 12

2.2 Conceptual Framework 13

2.2.1 Review of related literature 13

2.2.2 Empirical review of literature 14

2.2.3 Research gaps 16

2,3 Multiple taxation policy on the profitability of SSBs 17

2.3.lTax 17

2.3.2 Classification of taxes 17

2.3.3 Direct versus indirect 17

2.3.4 Proportional versus progressive tax 18

2.3.5 The purpose of taxation 18

2.3.6 Tax policies 18

2.3.7 Approaches to tax administration 19

2.3.8 Tax Policy and the performance of SSBs 19

2.3.9 Challenges ofprofitability of SSBs 24

2.4 Effect of tax administration on small Scale business enterprises 26

ix

2.4.1 Profitability of Small scale business .27

2.4,2 Problems encountered by profitability of small-scale businesses in trying to comply with

tax policies 28

2.4.3 Tax payer’s knowledge 29

2.4.4 Negative effects of income tax administration 29

2.4.5 Fines and penalties 30

2.4.6 Problems faced in income tax administration 31

2.5 Relationship between multiple taxation and profitability of small scale business enterprises

.3

CHAPTER THREE 35

RESEARCH METHODOLOGY 35

3.0 Introduction 35

3.lResearch design 35

3.2 Study Population 35

3.3 Sampling 36

3.3.1 Sampling design 36

3.3.2 Sample size 36

3.3.3 Sampling procedure 36

3.4 Study variables 37

3.5 Source of data 37

3.5.1 Primary Data collection 37

3.6 Methods of data collection and instruments 37

3.6.1 Questionnaires 37

3.6.2 Response rate 38

3.7 Measurement of Variables 38

x

3.7.1 Validity of Instruments .38

37.2 Pre-Testing 38

3.7.3 Reliability of Instruments 39

3.7.4 Data Validity 39

3.8 Data Processing and Analysis 39

3.8.1 Data processing 39

3.9 Ethical issues 39

3.10 Limitation ofthe study 40

CHAPTER FOUR 41

DATA PRESENTATION, ANALYSIS AND INTERPRETATION 41

4,0 Introduction 41

4.1 Response rate 41

4.2 Back Ground Information of Respondents 42

4.3 Age of the respondents 43

4.4 Response on the level of education of the respondents 45

4.5 Marital status ofthe respondents 46

4.6 To find the effect of multiple taxation policy on the profitability of small scale businesses

in Hoima Municipality, Mid-Western Uganda 47

4.7 To find out the effect of tax administration on small business businesses Hoima

Municipality, Mid-Western Uganda 49

4.8 To examine the relationship between multiple taxation and profitability of small scale

business businesses in 1-loima Municipality, Mid-Western Uganda 53

4.9 Data analysis and findings 55

xi

CI-IAPTER FIVE .57

SUMMARY OF FINDINGS, CONCLUSIONS AND RECOMMENDATIONS 57

5.0 Introduction 57

5.1 Summary of findings / discussion 57

5.1.lMultiple taxation policy on the profitability of small scale businesses 57

5.1.2 Tax administration on small business businesses 57

5.1.3 Multiple taxation and profitability of small scale business businesses 58

5.3 Conclusion 58

5.4 Recommendations 59

5.5 Limitation of the study 60

5.6 Areas for further research 61

REFERENCES 62

APPENDICES 67

APPENDIX I: QUESTIONNAiRE 67

APPENDIX 11: BUDGET 71

APPENDIX III: WORK PLAN AND TIMEFRAME

ABSTRACT

The pmpose of the study was to examine inultiple taxation and profitability of small scale business in Ho/ma Munici~ality, Mid-Western Uganda. The study was based on three specific objectives; to find the ejfect ~f multt~le taxation policy on the profitability of small scale businesses in Hoima ivlunicipaiii)4 Mid- Western Uganda, to find out the effect of tax administration on small business businesses Hoima Municipality, Mid-Western Uganda and to examine the relationship between multiple taxation and profitability of small scale business businesses in Hoima Municz~ality, Mid-Western Uganda. It was based on a descrz~tive survey design basing on the use ofqualitative and quantitative approaches that was adopted to examine the ef/~ct of multiple taxation and profitability of small scale business enterprises in Ho/ma Municipality Mid- Western Uganda. Simple random sampling andpurposive sampling techniques were used in the study. Questionnaires were used to collect primary and secondary sources of data from 50 out of 60 respondents, using simple random sampling. Data analysis was done using frequencies tables. Finally the report looked at the study results and gave the discussion of each finding. Therejàre, here, data analysis, procedures and response rate are focused on. Then the findings and graphs inclusions and recommendations are presented. The findings on thefirst objective provided to find the efficiency of multiple taxation policy on the projltability ofsmall scale businesses in Hoima Municipaliiy, Mid-Western Uganda. The study findings revealed that SSBs hene/ltedpeople in Ho/ma Municipality; Mid-Western Uganda had a positive effrci on the small business enteiprises with 68% of respondents who strongly agreed and 20% agreed. According objective two, to Jlnd out the e/frct of tax administration on small business businesses Hoima Municipalitj~ Mid-Western Uganda indicated that; the negative effect of tax administrations on profItability of small business enterprises indicated that business premises are locked in case of fiu7ure to pay taxes and have greatly increased overtime by response of 68% and there are suggestions that the government has done to improve income tax administration and has greatly increased overtime by 59%.According to objective three, to examine the relationship between multiple taxation and profitability of small scale business businesses in Hoima Municipality, Mid-Western Uganda. On average that, multiple taxation policies in the business have led to increase in gross profit margin as indicated over by 73% strongly agreed and also multz~le taxation helps in the growth of the business. Indicated that tax systems play an important role in encouraging growth, investment and innovation and facilitating international trade and mobility. Conclusion, constructing appropriate indicators and setting an appropriate tax rate is challenging. It requires extensive analysis of proflt margins and will usually be disputed by some in the business community. Small businesses are not necessarily small earners; rates need to be low enough to encourage firms a/the upper end of the threshold to join the general system and low enough to encourage informal entrepreneurs to comply. Recommendation, as a way of reducing the burden of income taxes on SSBs the tax authority should find a way of assessing the tax, in that the profitability of SSBs should pay early in the financial year in order to give enough lime to the businesses to pay their dues rather than making an assessment and demand for payment spontaneously The UI?~1 should improve awareness amongst the taxpayers of the need to pay taxes and how their tax liability is determined and the time process oft/ic tax assessment