Tax Education and Income Tax Filing Compliance among Small Taxpayers in Mbarara City

Boaz  Mwesigye; Dr. Frederick Nsambu  Kijjambu

doi:10.47672/ajacc.1895

Authors

Boaz Mwesigye Uganda Revenue Authority, Kampala, Uganda
Dr. Frederick Nsambu Kijjambu Mbarara University of Science and Technology, Mbarara

DOI:

https://doi.org/10.47672/ajacc.1895

Keywords:

Tax Education; Income Tax Filing Compliance; Small Taxpayer

Abstract

Purpose: This study aimed at establishing the relationship between tax education and income tax filing compliance among small taxpayers in Mbarara city. The study was driven by the fact that despite Uganda Revenue Authority's efforts to improve tax compliance, income tax filing compliance is still low among small taxpayers in Uganda in general and Mbarara city in particular.

Materials and Methods: A cross-sectional study design was used to collect data from 33,979 small taxpayers in Mbarara city out of which 31,324 were individual taxpayers while 2,655 were non-individual taxpayers. The sample size included 380 respondents out of which 350 were individual taxpayers while 30 were non-individual taxpayers. Systematic random sampling was used to select respondents from each of the six divisions of Mbarara city. Data was analyzed using SPSS version 26.0 where correlation coefficients were generated and presented in a table.

Findings: The correlation analysis revealed that tax education was positively and significantly related to taxpayers' income tax filing compliance (r=.631, p<0.05). Based on the findings, the study concludes that tax education plays a crucial role in improving income tax filing compliance among small taxpayers.

Implications to Theory, Practice and Policy: The study recommends a need for the government and tax authorities, in this case, Uganda Revenue Authority to put in place strategies and programs aimed at improving awareness about income tax filing. Some of these strategies include intensifying tax education and outreach services of the mobile tax office "˜Tujenge Bus Services' to all locations; introducing basic tax education at earlier stages of formal education such that citizens are informed about their future obligations to file income tax returns; translating all information about income tax filing in different local languages and publishing the same in print format for easy understanding. The study contributed significantly to the Theory of Reasoned Action by highlighting the role of education and sensitization in increasing taxpayer awareness about tax and improving voluntary income tax filing compliance. This will help the government to put in place policies that should be implemented by Uganda Revenue Authority to improve income tax filing compliance.

Downloads

Download data is not yet available.

References

Abdu, M., Jibir, A., & Muhammad, T. (2020). Analysis of Tax Compliance in Sub-Saharan Africa: Evidence from Firm-Level Study. Econometric Research in Finance, 5(2), 119-142. https://doi.org/10.2478/erfin-2020-0007

Ahmednour, A. Z. (2017). The relationship between tax education dimensions and tax compliance behaviour: The case of salaried taxpayers in Mogadishu, Somalia - GRIN. https://www.grin.com/document/416801

Ajzen, I., & Fishbein, M. (1980). Understanding attitudes and predicting social behavior. 278.

Ajzen, I., & Madden, T. J. (1986). Prediction of goal-directed behavior: Attitudes, intentions, and perceived behavioral control. Journal of Experimental Social Psychology, 22(5), 453-474. https://doi.org/10.1016/0022-1031(86)90045-4

Baporikar, N. (2022). Tax Education to Enhance Tax Compliance for Socio-Economic Development. International Journal of Sustainable Economies Management, 11(1), 1-28. https://doi.org/10.4018/IJSEM.313045

Bijiga, G. K. (2020). Factors Affecting Perception of Taxpayers towards the Seriousness of Tax Evasion in Bale Robe Town Administration, Oromia, Ethiopia. International Journal of Finance and Accounting, 9(2), 21-30. https://doi.org/10.5923/j.ijfa.20200902.01

Cialdini, R. B., & Goldstein, N. J. (2004). Social influence: compliance and conformity. Annual Review of Psychology, 55, 591-621. https://doi.org/10.1146/ANNUREV.PSYCH.55.090902.142015

Cleary, D. (2013). A survey on Attitudes and Behavior towards Tax and Compliance: A population Assessment for Ireland in 2008/2009.

Colman, A. M. (2015). Theory of Reasoned Action: A dictionary of psychology. In A dictionary of psychology (4th ed., p. 895). Oxford University Press. https://doi.org/10.5860/choice.44-0695

Doswell, W. M., Braxter, B. J., Cha, E. S., & Kim, K. H. (2011). Testing the theory of reasoned action in explaining sexual behavior among African American young teen girls. Journal of Pediatric Nursing, 26(6), e45-54. https://doi.org/10.1016/J.PEDN.2011.03.007

Ernst & Young Global Ltd. (2020, August 22). Why tax collection remains a challenge in sub-Saharan Africa | EY - Global. https://www.ey.com/en_gl/tax/why-tax-collection-remains-a-challenge-in-sub-saharan-africa

Eyinla, L. (2020, August 24). INSIGHT: Why Tax Collection Remains a Challenge in Sub-Saharan Africa. Ernst & Young, US. https://news.bloombergtax.com/daily-tax-report-international/insight-why-tax-collection-remains-a-challenge-in-sub-saharan-africa

Gitaru, K. (2017). The effect of taxpayer education on tax compliance in Kenya. Munich Personal RePEc Archive, 2(80344), 12-23. https://mpra.ub.uni-muenchen.de/id/eprint/80344

Hagger, M. S. (2019). The Reasoned Action Approach and the Theories of Reasoned Action and Planned Behavior. In D. S. Dunn (Ed.), Oxford Bibliographies in Psychology. Oxford University Press. https://doi.org/10.1016/0749-5978(91)90020-T

Halim, A., & Rahman, M. (2022). The effect of taxation on sustainable development goals: evidence from emerging countries. Heliyon, 8(9), e10512. https://doi.org/10.1016/J.HELIYON.2022.E10512

Hamid, N. A., Ismail, I. S., Yunus, N., Jali, M. N., & Rosly, A. S. (2022). Taxpayer Perceptions of Tax Awareness, Tax Education, and Tax Complexity among Small and Medium Enterprises in Malaysia: A Quadrant Analysis Approach. Universal Journal of Accounting and Finance, 10(1), 231-242. https://doi.org/10.13189/ujaf.2022.100124

Hanum, L., Putri, D., Ari, S., & Susilo, H. (2020). Determinant of tax compliance intention in Java-Indonesia: Theory of reasoned action approach. International Conference on Business and Public Administration, 154(AICoBPA 2019), 177-182.

Hassan, I., Naeem, A., & Gulzar, S. (2021). Voluntary tax compliance behavior of individual taxpayers in Pakistan. Financial Innovation, 7(1). https://doi.org/10.1186/s40854-021-00234-4

Hayes, A. (2022, August 30). Systematic Sampling: What Is It, and How Is It Used in Research? https://www.investopedia.com/terms/s/systematic-sampling.asp

Kazibwe, K. (2020, February 27). URA takes tax education drive to schools to boost revenue collection - Nile Post. https://nilepost.co.ug/2020/02/27/ura-takes-tax-education-drive-to-schools-to-boost-revenue-collection/

Kelman. (1958). Compliance, identification, and internalization: Three processes of attitude change. Journal of Conflict Resolution, 2(1).

Kiconco, R. I., Gwokyalya, W., Sserwanga, A., & Balunywa, W. (2019). Tax compliance behaviour of small business enterprises in Uganda. Journal of Financial Crime, 26(4), 1117-1132. https://doi.org/10.1108/JFC-03-2018-0031/FULL/PDF

Krejcie, R. V, & Morgan, D. W. (1970). Determining Sample Size for Research Activities. Educational and Physchological Measurement, 30, 607-610. https://doi.org/10.1891/9780826138446.0006

Kwok, B. Y. S., & Yip, R. W. Y. (2018). Is Tax Education Good or Evil for Boosting Tax Compliance? Evidence from Hong Kong. Asian Economic Journal, 32(4), 359-386. https://doi.org/10.1111/ASEJ.12163

Lukman, H., Wijaya, M. D. I., Trisnawati, E., & Wijaya, P. H. (2020). Theory of Reasoned Action as A Framework for Tax Volunteers Behavior: A Case Study of Accounting Students at Universitas Tarumanagara. Proceedings of the 2nd Tarumanagara International Conference on the Applications of Social Sciences and Humanities (TICASH 2020), 478, 1051-1055. https://doi.org/10.2991/assehr.k.201209.167

Mascagni, G. (2020, September 29). Taxpayer education: Why it matters and how research can help - ICTD. International Centre for Tax and Development. https://www.ictd.ac/blog/taxpayer-education-research/

Mascagni, G., & Santoro, F. (2018). ICTD Research in Brief: Why is tax education important for compliance?: Summary of African Tax Administration. ICTD Working Papers, 23.

Mbilla, A. S. E., Abiire, M. A., Atindaana, P. A., & Ayimpoya, R. N. (2020). Tax Education And Tax Compliance In Ghana. Researchjournali's Journal of Accounting, 28(1), 1-22.

Montano, D., Kasprzyk, D., Glanz, K., & Rimer, B. (2015). Theory of reasoned action, theory of planned behavior, and the integrated behavior model. In K. Glanz, B. K. Rimer, & K. Viswanath (Eds.), Health Behavior and Health Education: Theory, Research and Practice (4th ed., pp. 83-108). Jossey-Bass.

Mugenda, O. M., & Mugenda, A. G. (2003). Research Methods : Quantitative and Qualitative Approaches. African Centre for Technology Studies. https://www.worldcat.org/title/research-methods-quantitative-and-qualitative-approaches/oclc/44140665

Muhumuza, M. (2021, January 2). Tax compliance still a big problem, economists say | Monitor. Daily Monitor. https://www.monitor.co.ug/Business/Tax-compliance-still-a-big-problem--economists-say/-/688322/3207458/-/am5qubz/-/index.html

Mwanza, C. (2019). The Nexus of Tax Education and Compliance Among Small Business Enterprises in Otjiwarongo District, Namibia- GRIN. https://www.grin.com/document/509819

Nickerson, C. (2022, June 15). Theory of Reasoned Action. Simply Psychology. https://www.simplypsychology.org/theory-of-reasoned-action.html

OECD. (2020, November 24). Taxpayer education is a key tool to transform tax culture and increase voluntary compliance - OECD. https://www.oecd.org/tax/taxpayer-education-is-a-key-tool-to-transform-tax-culture-and-increase-voluntary-compliance.htm

OECD. (2023). Revenue Statistics in Africa 2023.

Ogungbade, O. I., Enitan, A., & Adekoya, A. C. (2021). Tax Awareness, Taxpayers' Perceptions and Attitudes and Tax Evasion in Informal Sector of Ekiti State, Nigeria. International Journal of Financial Research, 12(5), 24. https://doi.org/10.5430/ijfr.v12n5p24

Olatunbosum, D. (2015). The Influence of Tax Education on Tax Compliance. A Study of Lagos State Internal Revenue Service (LIRS) - GRIN. https://www.grin.com/document/1035596

Olusegun, V. (2021). Assessing SMEs tax non-compliance behaviour in Sub-Saharan Africa (SSA): An insight from Nigeria. Cogent Business and Management, 8(1). https://doi.org/10.1080/23311975.2021.1938930

Palil, M. R., & Rusyidi, M. A. (2013). The Perception of Tax Payers on Tax Knowledge and Tax Education with Level of Tax Compliance: A Study the Influences of Religiosity. ASEAN Journal of Economics, Management and Accounting, 1(1), 118-129.

Ranjit, K. (2019). Research Methodology: A Step-by-Step Guide for Beginners - Ranjit Kumar - Google Books. In Sage (5th Editio). SAGE Publications Inc.

Sadress, N., Bananuka, J., Orobia, L., & Opiso, J. (2017). Antecedents of Tax Compliance of Small Business Enterprises: a developing country perspective. International Journal of Law and Management. https://doi.org/https://doi.org/10.1108/ IJLMA-10-2017-0234

Senyonyi, T. W. (2020, February 26). URA Takes Tax Education To Schools » Business Focus. https://businessfocus.co.ug/ura-takes-tax-education-to-schools/

Shafique, A., Abbasi, M. S., Khalid, M. N., Awais, M., & Mehmood-ul-Hassan. (2021). The impact of taxpayer perception on tax compliance moderated by adoption of e-tax system. Sarhad Journal of Management Sciences (SJMS), 7(1), 219-236.

Shi, J., Mo, X., & Sun, Z. (2012). Content validity index in scale development. Journal of Central South University Medical Sciences, 37(2), 152-155. https://doi.org/10.3969/J.ISSN.1672-7347.2012.02.007

Tarekegn, M. (2016). Taxpayers' Perception on the Seriousness of Tax Evasion in Dessie Town Administration, Ethiopia. Research Journal of Finance and Accounting, 7(19), 93-99.

Teega, S. (2008). The Effect of Tax Education on Tax Compliance in Uganda: A Case Study of Kampala Central Tax District. Uganda Martyrs University. http://ir.umu.ac.ug/xmlui/handle/20.500.12280/972

Thomas, L. (2022, December 22). Systematic Sampling | A Step-by-Step Guide with Examples. https://www.scribbr.com/methodology/systematic-sampling/

Trawule, A. Y., Gadzo, S. G., Kportorgbi, H. K., & Sam-Quarm, R. (2022). Tax education and fear-appealing messages: A grease or sand in the wheels of tax compliance? Cogent Business & Management, 9(1). https://doi.org/10.1080/23311975.2022.2049436

UBOS. (2011). Uganda bureau of statistics Report on the Census of Business Establishments 2010/11 (Issue 256).

Uganda Revenue Authority. (2020). Taxation Handbook: A Guide to Taxation in Uganda. Uganda Revenue Authority.

UNDESA. (2022). Taxation and the SDGs | Financing for Sustainable Development Office. https://www.un.org/development/desa/financing/what-we-do/ECOSOC/tax-committee/thematic-areas/taxation-and-sdgs

URA. (2019). Taxpayer segmentaton creteria effective July, 2019.

URA. (2020). Uganda Revenue Authority Service Offices and contacts.

URA. (2023). URA Annual Data Book FY2021/2022. Uganda Revenue Authority.

Waiswa, R., Akol, D., & Isingoma, M. N. (2020). Who can make Ugandan taxpayers more compliant? In ICTD African Tax Administration Paper 18, UK: Institute of Development Studies (Issue July).

Widuri, R., & Irawan, W. (2019). Tax justice perception and trust in government on tax compliance. Advances in Economics, Business and Management Research, 103, 126-131. https://doi.org/10.2991/teams-19.2019.20

World Bank. (2020). Taxes & Government Revenue. https://www.worldbank.org/en/topic/taxes-and-government-revenue

World Bank. (2022, February 17). Innovations in Tax Compliance. https://www.worldbank.org/en/topic/macroeconomics/brief/innovations-in-tax-compliance