Tax administration and entrepreneurial performance of small businesses in Kira Municipality- Uganda

Abstract

This study examined the influence of tax administration on entrepreneurial performance of SMEs in Kira Municipality, Uganda. Anchored on Institutional Theory, the research addressed a critical gap in understanding how the specific institutional dimensions of tax administration—tax purpose and objective, tax knowledge and awareness, and tax assessment—affect SME performance in a developing economy context. The study employed a descriptive cross-sectional research design and collected primary data from 340 SME owners and managers using structured questionnaires. Quantitative data were analyzed using descriptive statistics and multiple regression analysis. The findings revealed that tax knowledge and awareness had a significant positive influence on entrepreneurial performance, while tax purpose and objective also contributed positively by building trust and legitimacy. Tax assessment showed a significant relationship with performance, with fair, transparent, and predictable assessment processes enhancing profitability, innovation, and reinvestment capacity, whereas arbitrary or burdensome assessments reduced them. Overall, the institutional quality of tax administration emerged as a key determinant of SME success in Kira Municipality. The study concluded that although tax administration remains vital for revenue mobilization, its current institutional weaknesses undermine SME growth unless deliberately reoriented to support entrepreneurship. It recommended that policy makers and the Uganda Revenue Authority strengthen tax purpose clarity, intensify taxpayer education programs, simplify procedures, and adopt more transparent, equitable, and predictable tax assessment practices. These measures would reduce compliance costs, promote voluntary compliance, and create an enabling institutional environment for SME expansion, job creation, and inclusive economic development in Uganda.