MJAMR

Influence of Tax Compliance Costs on SME Performance: A Case Study of SMEs in Kagadi District

Akampurira Sarah, Agaba Devis


Abstract

Tax compliance costs represented significant burdens for small and medium enterprises, particularly in developing economies where tax systems were complex and SME resources were limited. Kagadi District, located in Western Uganda, hosted approximately 2,847 registered SMEs as of September 2023, contributing substantially to local employment, economic activity, and tax revenues. This study investigated the influence of tax compliance costs on SME performance in Kagadi District, conducted between July 2023 and March 2024. Tax compliance costs were examined across four dimensions: monetary costs including tax consultant fees and software expenses, time costs involving hours spent on tax matters, psychological costs reflecting stress and anxiety associated with compliance, and administrative costs related to record-keeping and documentation requirements. SME performance was measured using financial indicators including revenue growth, profitability, and cash flow adequacy, and non-financial indicators including business expansion, employment creation, and investment capacity. The study employed a descriptive correlational research design utilizing mixed methods approaches. From 2,847 registered SMEs in Kagadi District, a sample of 351 SMEs was determined using Yamane's formula and selected through stratified random sampling across three sectors: retail trade (168 SMEs), services (112 SMEs), and manufacturing (71 SMEs). Data collection utilized structured questionnaires administered to 351 SME owners/managers, supplemented by key informant interviews with 8 Uganda Revenue Authority officials, 6 tax consultants, and 4 local government revenue officers. Document analysis of tax compliance records and financial statements covered fiscal years 2021-2023. The questionnaire demonstrated high reliability with Cronbach's Alpha of 0.879. Data analysis employed SPSS version 29, utilizing descriptive statistics, Pearson correlation analysis, and multiple regression models to establish relationships between tax compliance cost dimensions and SME performance indicators. Findings revealed that tax compliance costs significantly and negatively influenced SME performance (r=-0.764, p

Keywords

Tax compliance costs SME performance Kagadi District small and medium enterprises tax administration Uganda Revenue Authority business taxation regulatory burden
Metropolitan Journal of Academic Multidisciplinary Research

Cite This Article

Akampurira Sarah & Agaba Devis (2026). Influence of Tax Compliance Costs on SME Performance: A Case Study of SMEs in Kagadi District. Metropolitan Journal of Academic Multidisciplinary Research, 5(3). https://journals.miu.ac.ug/pages/article.php?article_id=305

More in This Issue

View full issue →
1
Adoption of Digital Tax Systems: Evidence from SMEs’ Awareness and Use of EFRIS in Kampala, Uganda
Balisanyuka Paul Mulunzi
Electronic Fiscal Receipting and Invoicing Solution (EFRIS); Digital Tax Systems; SME Performance; Tax Compliance; Technology Adoption; Uganda
2
COVID-19 PANDEMIC AND THE FINANCIAL PERFORMANCE OF SMALL-SCALE BUSINESSES IN KAKOBA DIVISION, MBARARA CITY
JACKSON BALINURA
COVID-19 PANDEMIC AND THE FINANCIAL PERFORMANCE OF SMALL-SCALE BUSINESSES IN KAKOBA DIVISION MBARARA CITY
3
DIGITAL BANKING ADOPTION AND LOAN PERFORMANCE OF SELECTED MICROFINANCE INSTITUTIONS IN MUKONO DISTRICT
AKANKWATSA ANNITAH
Digital Banking Adoption and Loan Performance in Selected Microfinance Institutions in Mukono District
4
Effect of Business Environment Regulations on Enterprise Competitiveness: A Case Study of Mbarara Industrial Park
Irumba Alex1 , Asiimwe Prisca2
Business environment regulations enterprise competitiveness industrial park Mbarara
5
Effect Of Employee Involvement (El) On Organizational Performance. A Case Study Of Mukwano Industries
Niwahereza Joan1 , Otim John William2
Employee involvement organizational performance participative decision making employee empowerment