Gross turnover assessment and tax compliance in Uganda’s small businesses: a deep inquiry on the certainty of presumptive tax law

Abstract

Purpose

This study aims to investigate the certainty of small business (SB) taxpayers about the presumptive tax law concerning the assessment of income tax based on gross turnover and how this impacts their income tax compliance.

Design/methodology/approach

The study adopted the exploratory research design. The saturation point was attained upon interviewing nine owners of SB enterprises, eight tax officers from the Uganda Revenue Authority and eight tax consultants. Themes were identified and explained using verbatim texts from the various interviews. Data were analyzed using the content analysis technique.

Findings

The findings indicate that SB taxpayers are uncertain about the nature of the presumptive tax, that it is assessed based on annual sales, indicators used to determine gross turnover and their actual tax liability. This has occasioned resistance to the tax system and inhibited voluntary compliance. SB taxpayers thus opt to wait for the tax officers to make tax assessments. However, they have used this opportunity to bribe or bargain with tax officers to pay low amounts in tax or no tax at all. Thus, policymakers and revenue authorities ought to concentrate on creating massive sensitization of the law on presumptive tax, in this case, the existing tax base on which the tax is imposed and its elements to improve income tax compliance of SBs.

Research limitations/implications

These results are relevant to policymakers and Revenue authorities in developing countries, especially in Africa, in improving income tax compliance of SBs.

Originality/value

This study examines the contribution of certainty of the income tax law on the tax base (gross turnover) on which presumptive tax is imposed to income tax compliance of SBs, which has hardly been covered in previous studies.

Citation

Gwokyalya, W. and Okumu, I.M. (2023), "Gross turnover assessment and tax compliance in Uganda’s small businesses: a deep inquiry on the certainty of presumptive tax law", International Journal of Law and Management, Vol. 65 No. 5, pp. 405-424. https://doi.org/10.1108/IJLMA-10-2022-0221