The Effects of Tax Administration on The Performance of Medium and Small-Scale Enterprises in Lira Municipality, A Case Study of Lira Main Market

ABSTRACT This study targeted establishing the effects of tax administration on the performance of medium and small scale enterprises with a case study of Lira Main Market - Lira Municipality. The objectives of the study included; establishing the performance levels of medium and small scale enterprises, examining the nature of tax administration process imposed on the medium and small scale enterprises and to determine the relationship between tax administration and performance levels in medium and small scale enterprises. The researcher adopted a blend of cross sectional and descriptive research designs. The respondents were selected by using stratified and random sampling techniques. A research questionnaire to examine the effects of tax administration was tested for validity and reliability and administered to collect primary data while interviews were used face - to ~ face. The researcher came up with recommendation on the final report.

TABLE OF CONTENTS 

TITLE PAGE .............................................................................. . 

MAP OF UGANDA SHOWING LIRA DISTRICT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ii 

MAP OF LIRA DISTRICT SHOWING THE STUDY AREA . . . . . . . . . . . . . . . . . . . . . iii 

DECLARATION........................................................................... iv 

APPROVAL................................................................................ V 

DEDICATION . . . .. . . .. .. . . . .. . . . . . ... . . . . . . ... . . . . . . .......... .. . . . ... . . . . . . . . . ... . . . .. .. VI 

ACKNOWLEDGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vii 

TABLE OF CONTENTS.................................................................. viii 

LIST OF TABLES......................................................................... XI 

ABBREVIATIONS . .. ... . . . . . . ... . .. . . . . .. . . . . . . . . . ... . .. . . . . . . . . . .. . . . . . . . . . . ..... .. . . .. Xll 

LIST OF APPENDICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. Xlll 

CONCEPTUAL FRAME WORK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ... . . . . . . . . . XIV 

ABSTRACT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ... xv 

CHAPTER ONE 

1.0 INTRODUCTION................................................................. 1 

I.I BACKGROUND TO THE STUDY............................................ 1 

1.2 STATEMENT OF THE PROBLEM........................................... 2 

1.3 PURPOSE OF THE STUDY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . 2 

1.4 OBJECTIVES OF THE STUDY............................................... 3 

1.5 RESEARCH QUESTIONS..................................................... 3 

1.6 TIME PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 

1.7 SCOPE OF THE STUDY....................................................... 4 

1.8 SIGNIFICANCE OF THE STUDY............................................ 4 

1.9 HYPOTHESIS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 

CHAPTER TWO 

LITERATURE REVIEW 

2.0 INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 5 

2.1 CONCEPTUALIZATION AND OPERATIONALIZATION AND 

STUDY VARIABLES ............................................................ 5 

Vlll 

2.2 TAXATION AUTHORITY...................................................... 5 

2.2.1 OBJECTIVES OF TAXATION................................................. 7 

2.2.2 PRINCIPLES/ CANONS OF TAXATION.................................. 8 

2.3.1 TAX ADMINISTRATION....................................................... 10 

2.3.2 IMPORTANCE OF TAX ADMINISTRATION.............................. 12 

2.4 MEDIUM AND SMALL SCALE ENTERPRISES ........................... 13 

2.5 PERFORMANCE OF MEDIUM AND SMALL SCALE 

ENTERPRISES.................................................................... 14 

2.6 PERFORMANCE OF SMALL AND MEDIUM SCALE 

ENTERPRISES IN LIRA MAIN MARKET................................. 15 

2.7 RELATIONSHIP BETWEEN TAX ADMINISTRATION AND 

PERFORMANCE OF MEDIUM AND SMALL SCALE 

ENTERPRISES.................................................................... 15 

2.8 RELATIONSHIP BETWEEN TAX ADMINISTRATION AND 

PERFORMANCE OF SMALL AND MEDIUM SCALE ENTERPRISES 

IN LIRA MAIN MARKET....................................................... 16 

2.9 CONCLUSION.................................................................... 17 

CHAPTER THREE (RESEARCH METHODOLOGY) 

3.1 INTRODUCTION................................................................. 18 

3.2 RESEARCH DESIGN............................................................ 18 

3.3 SAMPLING DESIGN AND PROCEDURES................................ 18 

3.4 SAMPLE POPULATION AND SIZE......................................... 18 

3.5.1 DATA COLLECTION.......................................................... 19 

3.5.2 METHODS OF DATA COLLECTION....................................... 19 

3.6 MEASUREMENT OF VARIABLES.......................................... 20 

3.7 DATAANALYSIS ................................................................ 20 

3.8 LIMITATIONS................................................................... 20 

3.9 DELIMITATIONS............................................................... 20 

CHAPTER FOUR 

PRESENTATION, INTERPRETATION AND DISCUSSION OF FINDINGS 

4.1 INTRODUCTION............................................................... 21 

IX 

4.2 RESPONDENTS PERSONAL DAT A .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. ... 21 

4.2.1 GENDER OF RESPONDENTS................................................ 21 

4.2.2 RESPONDENTS AGE .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. 22 

4.3 RESPONDENTS NATURE OF BUSINESS .. .. .. .. .. .. .. .. .. .... .. .. .. .... 22 

4.3.1 POSITION OF THE RESPONDENT IN THE BUSINESS .. .. .. .. .. .. .. .. 23 

4.3.2 NUMBER OF EMPLOYEES IN THE BUSINESS .. .. .. .. .. .. .... .. .. ..... 23 

4.3.3 PAYMENT OF INCOME TAX................................................ 24 

4.4 THE EFFECTS OF TAX ADMINISTRATION PROCESS ............ .... 24 

4.4.1 RECEIPT OF TAX ASSESSMENT FORMS................................ 24 

4.4.2 KEEPING BOOKS OF ACCOUNTS FOR TAX ASSESSMENT 

PURPOSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 25 

4.5 DETERMINATION OF TAX LIABILITY................................. 26 

4.6.1 PERFORMANCE IN TERMS OF STOCK LEVELS ... .................. 26 

4.6.2 PERFORMANCE LEVEL OF SMALL AND MEDIUM 

SCALE ENTERPRISES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 

4.7 AMOUNT OF TAX PAID BY THE ENTITIES ANNUALLY......... 28 

4.8 THE OVERALL OPINION ABOUT THE TAX PAID................... 28 

4.9 NATURE OF RESPONSE AUTHORITY................................. 29 

4.10 EFFECTS OF TAX ADMINISTRATION OF THE 

EXPANSION OF STOCK LEVELS ....................................... 30 

4.11 RELATIONSHIP BETWEEN TAX ADMINISTRATION 

AND PERFORMANCE LEVEL OF SMALL AND MEDIUM 

SCALE ENTERPRISES .. . . .. .. . . . . .. . .. .. . . . . . . .. . .. . . . .. . . . . . . . . . . . . . . . . . . . 30 

CHAPTER FIVE 

SUMMARY, CONCLUSION AND RECOMMENDATIONS 

5.1 INTRODUCTION .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. 32 

5.2 SUMMARY . . . .. . .. . . . . . . . . . . . . . ... . . . . . . . .. .. . . . . .. . . .. . . . . . . . .. . . . . . . ... . . . . ... 32 

5.3 CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 

5.4 RECOMMENDATIONS....................................................... 33 

5.5 AREAS FOR FURTHER RESEARCH .. .. .. .... .. .. .. .. .. .... .. .. .. .... .... 33 

REFERENCES .. . . . . . . . .. . . . . . . . .. . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 34