Impacts of Tax Laws on the Performance of Small and Medium Enterprises: A Case Study of Kabale Municipality Kabale.
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Date
2024
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Publisher
Kabale University
Abstract
The study aimed to assess the diverse impacts of tax laws on the performance of SMEs in Kabale Municipality, identify the constraints these laws place on SME performance, and explore the relationship between tax laws and their effects on SMEs. Additionally, it sought to evaluate how current tax regulations affect SMEs in Kabale Municipality, investigate potential policy recommendations, and assess how tax compliance costs impact SME performance, particularly their ability to compete globally. The study also aimed to determine the challenges SMEs face in complying with tax laws and explore potential policy recommendations and strategies to improve the tax environment for SMEs and promote their growth. A descriptive research design was employed, utilizing quantitative and qualitative research methods. The results indicated that 81 (54.7%) of participants were male, while 67 (45.3%) were female. The education level of respondents showed that the smallest percentage, 2 (1.4%), had not attained higher education, while the majority, 57 (38.5%), had obtained certificates in various fields. The dominant age group was 18-34 years old, comprising 73 (49.3%) of respondents. Most respondents, 41 (27.7%), were managers of entertainment venues, bars, and retail and wholesale businesses.
Additionally, 25 (16.9%) worked in hotels and restaurants, 12 (8.1%) in metal fabrication, 10 (6.8%) as technical revenue officials, and the remaining worked in manufacturing entities. The findings showed that 80 (53.3%) of respondents agreed that SMEs are typically subject to corporate income tax on their profits, with tax rates varying by country and annual income brackets. Some regions offer preferential tax rates or incentives for SMEs. The results aligned well with theoretical expectations, with 70 (47%) of respondents agreeing that tax laws are often complex and challenging for SMEs to navigate, requiring time, expertise, and sometimes external assistance from tax professionals or accountants. Moreover, 90 (60%) of respondents revealed that tax penalties impose a significant financial burden on SMEs, affecting their operational budgets and liquidity. The study recommended providing accessible and targeted educational resources to help SMEs understand their tax obligations and optimize their tax planning strategies. Additionally, it suggested implementing targeted tax breaks and credits specifically aimed at SMEs to encourage innovation and investment.
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Keywords
Impacts, Tax Laws, Performance, Small, Medium Enterprises, Municipality Kabale
Citation
Abaasa, Ruth (2024). Impacts of Tax Laws on the Performance of Small and Medium Enterprises: A Case Study of Kabale Municipality Kabale. Kabale: Kabale University.