Income tax rates and tax compliance: a case of Britania allied industries limited

Abstract

The study sought to examine the relationship between income tax rates and tax compliance using a case or Britania /\!lied Industries Limited. The specific objectives of the study include: (1) to examine the relationship between PAYE Rates and tax compliance, (2) to assess the relationship between corporation tax rates and tax compliance. and (3) to analyse the combined influence of PAYE and corporation tax on tax compliance. A case study research design was used with both quantitative and qualitative research strategies. The study was based on a sample of 60 respondents selected among URA staff (supervisors and staff) as well as management and some staff members of Britania. Data collection was done through the use of questionnaire and interview methods. Data was later analyzed using correlation and regression analysis. On the basis of this analysis. the findings of the study reveal that PAYE rates are high, unfair based on levels or income. and attributed to tax avoidance/evasion for some tax payers inclusive of business enterprises as per r=0.714. Except for Britania that is tax compliant, business enterprises fairly file returns and remit PA YE timely to URA. Uganda· s corporation lax rate is high and partly attributed to tax avoidance/evasion by business enterprises (r=0.792). Most business enterprises do not file/remit provisional returns in line with See.111 of the Income Tax Act (2014). There is a significant negative combined effect of high PAYE tax rates and corporation tax rate on tax compliance based on 2-stage least squares regression with f =92.9. Other factors responsible for tax non-compliance arc: ignorance of tax payers, tax system, tax payers' negative perception and attitude or tax payers. Recommendations to the study include: establishing a full- edged research and development dcpat1mcnt. significantly reducing tax rates or scrapping off PAYE and corporation taxes. focus on partnerships and strategic alliances, ensure adequate accountability of taxpayers' money and focus on communicating to taxpayers the benefits of tax compliance or consequences arising from tax non-compliance.