Tax Administration and Growth of SMEs. A Case of Mukono Municipality

Abstract

The study found out the tax administration and growth of SMEs. The three research objectives that guided the study included; examining the relationship between tax policies and growth of SMEs, identifying the relationship between tax incentives and growth of SMEs and examining the relationship between tax administration and growth of SMEs. The study employed a cross sectional research design that was descriptive in nature, used to describe characteristics of the population and other phenomenon studied. The researcher also used quantitative data that was analysed using the Statistical Package for the Social Sciences (SPSS) computer program to come up with the findings that the relationship between tax administration and growth of SMEs included; Tax administration is one of the factors to improve a business’s public image, Tax administration is not a time-consuming activity if a business keep financial checks and plans up to date, Tax administration facilitates business functions and progress, Overlooking and delaying tax payments causes financial damage to SMEs, Tax reductions are particularly crucial for small businesses since they cannot afford to pay beyond their generating capacity. The study concluded that, the relationship between tax incentives and SMEs’ Growth included; Tax incentives contribute to predicting GDP growth, Tax incentives are significant strategic drive for business and industrial growth, Tax exemptions decrease tax burden of SMEs more than that of tax rates which positions them to reinvest their capital for their efficient functioning, Tax incentives lower tax amount payable hence supporting the growth SMEs, Firms with incentives perform better than firms without incentives in terms of gross sales and value added, Tax incentives are predictors of sustainable SME growth. The study recommended that, the tax administration in Uganda should be granted total autonomy. This will make the internal revenue board to recruit the best professionals to manage the professional posts in the country. In this regard, it will be possible for the authorities to attract the best brains and pay them handsomely. It is my feeling that tax officials being at the vanguard of generating revenue and increasing the wealth of the nation should be given full autonomy in tax administration.