Tax administration, morale and compliance in small and medium enterprises in Lira municipality Uganda

Abstract

The SMEs tax to GDP ratio in Uganda stand at 2.8 percent and this includes the contribution from those SMEs operating in Lira Municipality. This results into tax gaps which are collected by government in its quest to provide public goods and services (UIA, 2017). This study aimed at examining the relationship between tax administration, tax morale and tax compliance and a case study design approach was used as it allowed empirical inquiry and investigation of the variables studied. The study revealed that the level of tax compliance by SMEs operating in Lira Municipality is moderately low and as matter of fact tax to GDP ratio is a measure of compliance and this confirms that SMEs contributes little to the national treasury, it is therefore imperative that much has to be done in areas of tax administration and tax morale which are main determinants of tax compliance. The study also found out that taxpayer education and tax audit are positively correlated with tax compliance this therefore means that a boost in taxpayer education and tax audit would result into a positive increase in the level of tax compliance and subsequently boosting domestic revenue. It was also found out that tax morale has got positive relationship with tax administration and tax compliance, therefore its mediating effect on tax administration is key factor in boosting compliance as such much needed to be done to ensure that the level of morale of SMEs of Lira municipality is increased so that it can boost tax administration and subsequently enhancing compliance level. In conclusion therefore tax compliance by SMEs of Lira municipality is moderately low and as we are aware governments all over the world depends entirely on taxation as a means of raising funds to provide public goods and services. Therefore a lot has to be done in the area of tax administration and tax morale so as compliance level of SMEs in Lira Municipality is enhanced which will then transform into high revenue yields for government.