THE INFLUENCE OF TAX POLICIES ON THE FINANCIAL PERFORMANCE OF SMALL-SCALE ENTERPRISES

Abstract

The research examined the impact of tax policies on the financial performance of small-scale enterprises in Uganda. In order to achieve the above aim, certain objectives of the study had to be formulated to: examine the impact of tax rates on the financial performance of small-scale businesses, examine the influence of tax compliance on the financial performance of small scale businesses, and examine the influence of tax incentives on the financial performance of small-scale enterprises. This study employed a descriptive design where both qualitative and quantitative approaches were used. The study population of 22 small-scale businesses was used to select 21 small-scale businesses as the sample size using random sampling. Data collection was done using self-administered questionnaires and interview guide. Quantitative data was analyzed using the Statistical Package for Social Sciences also known as SPSS. The research findings indicated that high tax rates have a strong negative effect on the financial performance of small-scale businesses, tax compliance on the other hand was proven to have a positive influence on the financial performance of small-scale businesses. The findings also indicated that tax incentives have a strong positive effect on the financial performance of small-scale businesses as it reduces costs incurred by these businesses hence earning them more profits for expansion. The study concluded that all the tax policies such as tax rates, tax compliance and tax incentives have a significant influence on the financial performance of small-scale enterprises. The study recommended that the government organizes tax sensitization programs which keep business owners well engaged in order to keep them updated about the tax system, it also recommended simplifying of the tax system to make tax compliance easier for the tax payers. ix