The Effects Of Taxation On Profitability Of Firms A Case Of Mtn (Uganda)

ABSTRACT

Uganda's tax system has been characterized by several types of taxes. These have however not helped to widen the tax base of the country and hence there has been low revenue collection as opposed to the objective of government policy to increase revenue out-turn. With the above view in mind, the government decided in 1994, to change her current tax system to a new one, whereby Sales Tax (ST) and Commercial Transaction Levy (CTL) tax were replaced by VAT, with hope that URA at the wheel, will be obtained, just like revenue collection have been increasing every year since 1992. The objectives of the study were to examine the effect of imposing tax on traders, identifying its effect on administration, identifying the perceptions of business community, implementation process and the way forward (solutions) on whether to continue with it or not. The study was conducted within the heart of MTN where I interviewed 30 members of staff and 15 U.R.A officials which were chosen on a random basis. The data was basically primary and secondary which was collected from different categories of respondents such as traders, URA officials and other professionals. The findings revealed that since the imposition of tax, its impact on traders was not immediately realized but to date, traders have started to realize its effect though its still a mixed feeling more particularly regarding the knowledge about its impact on the sales turnover, profits and taxable capacity. The result of the study showed that taxation system is bound to be much successful but after much more ground has been leveled for some of the reasons such as competent and committed manpower, political will, appropriate tax administration or laws, proper book keeping system, voluntary compliance and the entire public support.