Value Added Tax Policy And Business Performance: A Case Study Central Trading Company Ltd Kampala Central Division, Uganda

ABSTRACT

The study was designed to establish the effect of Value Added Tax policy on business performance of Central Trading Company ltd. The researcher was triggered to undertake this study by the fact that the company meets with the failure to increase sales and this has a big impact on organizational performance in terms of sales revenue maximization and profitability. The study was conducted to find out the way VAT is imposed and administered, to establish the factors affecting business performance of the company, and the relationship between VAT policy and business performance. The researcher employed a longitudinal and analytical researcher design to analyse Value Added Tax policy and its effect on business performance. The data was collected from both secondary and primary sources through use of interviews and questionnaires. Respondents were selected by use of purposive sampling and simple random sampling. The findings from the study revealed that the company uses accrual accounting method when accounting for VAT. Also findings showed that VAT is charged on the registered persons with a turnover of 50 million shillings in three consecutive calendar months and that VAT is charged on the 15th day of the following month and remitted to URA. It was also discovered that factors like low purchasing power, competition and economic changes affect business performance of the company. Finally, findings indicated an inverse relationship between Value Added Tax and business performance. In line with the findings, the following recommendations were made; the standard rate for VAT of 18 percent should be reduced to say 12 percent. URA also should be able to consider problems facing taxpayers and try to design tax policies accordingly to reduce on the taxpayers burden. 

TABLE OF CONTENTS

DECLARATION

APPROVAL

DEDICATION

ACKNOWLEDGEMENT

TABLE OF CONTENTS

LIST OF TABLES

LIST OF FIGURES

DEFINITION OF TERMS

LIST OF ACRONYMS

ABSTRACT

CHAPTER ONE

1.0 Introduction

1.1 Background to the Study

1.2 Statement of the Problem

1.3 Purpose of the Study

1.4 Objectives of the Study

1.5 Research Questions

1.6 Scope of the Study

6.1 Subject Scope

6.1.2 Geographical Scope

6.1.3 Time Scope

1.7 Significance of the Study

CHAPTER TWO

LITERATURE REVIEW

2.0 Introduction

2. 1 Value Added Tax

2.2 Tax Policy

2.3 Business Performance

2.4 Measures of Business Performance

2.5 Factors Affecting Business Performance

2.6 Effect of Imposition of a Tax on Business Performance

CHAPTER THREE

METHODOLOGY

3.0 Introduction

3 .1 Research Design

3.2 Study Population

3.3 Sample Size

3.4 Sampling Design

3.5 Data Collection Methods

3.5.1 Questionnaires

3.5.2 Interviews

3.5.1 Primary Sources of Data

3.5.2 Secondary Sources of Data

3.6 Data Processing and Analysis

CHAPTER FOUR

PRESENTATION, INTERPRETATION, DISCUSSION AND ANALYSIS OF FINDINGS

4.0 Introduction

4.1 Findings on Background Information

4.1.1 Response rate

4.1.2 Gender respondents

4.1.3 Level of education

4.2 Value Added Tax Policy Administration

4.2.1 VAT Registration

4.2.2 VAT Collection Method

4.2.3 Rates of VAT used by URA

4.2.4 Findings on how often VAT is charged

4.2.5 Findings on calculations of VAT

4.2.6 Accounting for VAT

4.3 Business Performance

4.3.1 Total sales performance in the corresponding years (2006-2010) in millions

4.3.2 Findings on how often customers buy goods and services

4.4 Testing for the relationship between VAT and business performance

CHAPTER FIVE

SUMMARY OF MAJOR FINDINGS, CONCLUSION AND RECOMMENDATIONS

5.0 Introduction

5.1 Summary of Findings

5 .2 Conclusion

5.3 Recommendations

5.4 Areas of further research

REFERENCES:

INTERVIEW GUIDE

RESEARCH QUESTIONNAIRE: FOR URA OFFICIALS

RESEARCH QUESTIONNAIRE: FOR CENTRAL TRADING COMPANY