Financial Capacity, Tax Morale and Tax Compliance among SMEs in Jinja City, Uganda.
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Date
2025-10-25
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Makerere University Business School
Abstract
Tax compliance among SMEs is a pressing issue in tax administration in Uganda. The critical problem of non-compliance among SMEs impacts the revenue collection and provision of goods and services in Jinja city. The specific objectives for the study were to examine the relationship between financial capacity and tax compliance among SMEs in Jinja City; to assess the relationship between tax morale and tax compliance among SMEs in Jinja City; to determine the combined effect of financial capacity and tax morale on tax compliance among SMEs in Jinja city and to understand tax compliance among SMEs in Jinja City. The study utilized the quantitative method complemented by qualitative insights and descriptive analysis. Quantitative data was collected from a sample of 295 SMEs through a structured questionnaire and analysed using SPSS software. In addition, qualitative data was obtained from 6 purposively selected tax officials through interviews and was analysed thematically to supplement and validate the quantitative findings. The findings revealed that both financial capacity and tax morale significantly correlate with tax compliance, with financial capacity exerting a strong influence. Further analysis indicated that factors such as the duration of SMEs operation, asset value, number of employees and sales turnover also significantly affect tax compliance levels among SMEs. This study recommends that policy makers and tax authorities integrate tax education into digital and social skills and trainings as well as nudging strategies. Incorporating financial resilience indicators could help mitigate noncompliance and promote non deterrence approaches. The study highlights tax compliance dimensions such as timely returns and payments and emphasizes enhancing tax morale as a long-term policy. Tax authorities are encouraged to adopt non deterrence strategies like education and awareness, reminders, waivers, and simplifying tax processes to motivate SMEs.
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This is a master's thesis.
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Citation
Birungi, G. (2025) Financial Capacity, Tax Morale and Tax Compliance among SMEs in Jinja City, Uganda. Makerere University Business School.