Research consultancy

Research consultancy

THE IMPACT OF TAX EDUCATION ON INCOME TAX PERFORMANCE:
A CASE STUDY OF THE UGANDA REVENUE AUTHORITY

ABSTRACT

This study examined the effect of tax education on income tax performance, focusing on the Uganda Revenue Authority (URA) in Nakawa. The specific objectives were to: (1) assess the level of tax education in Uganda, (2) analyze annual income tax revenue collections, (3) explore the determinants of income tax performance, and (4) propose policy recommendations for enhancing income tax efficiency.

A mixed-methods approach (qualitative and quantitative) was employed, with data collected from URA Nakawa staff, including officials from the finance and ICT departments, accountants, and auditors.

Key findings revealed that URA conducts training on new tax policies for both staff and taxpayers, enhancing awareness and compliance. Results indicated that taxpayers are generally informed about tax policies, and URA’s tax regulations are perceived as fair. Additionally, penalties for non-compliance were found to reinforce adherence, while improving public-sector salaries was identified as a factor that could boost tax contributions.

The study recommends that URA:

• Continue and expand taxpayer education programs to improve compliance.
• Design equitable tax policies to enhance voluntary compliance.
• Strengthen the business environment to facilitate tax payments.
• Improve staffing and operational capacity for better revenue administration.

Areas for further research include:

• The role of ICT in URA’s performance.
• The impact of goods and services pricing on Uganda’s currency value.
• Challenges of modern technology on employee productivity.

CHAPTER ONE: BACKGROUND AND CONTEXT

1.1 Background to the Study

Governments in developing countries prioritize economic growth, yet revenue collection challenges often hinder progress. Taxation remains a primary revenue source, funding public services, infrastructure, and governance (Rondinelli, 2013). However, many Least Developed Countries (LDCs), including Uganda, struggle with low revenue mobilization, limiting sustainable development (Corbacho, 2013). Effective tax policies are crucial for domestic resource mobilization (Morrissey, 2015).

Income Tax Performance in Uganda
Uganda’s income tax applies to individuals, businesses, and corporate entities, with residents taxed on global income and non-residents only on Uganda-sourced income (Kangave, 2016). Despite reforms under Vision 2040, revenue collection remains below potential due to a narrow tax base, reliance on volatile trade taxes, and compliance challenges (Wawire, 2015). Persistent budget deficits highlight the need for improved tax administration (Nzomoi, 2013).

Taxpayer Education in Uganda
Taxpayer education promotes compliance by clarifying tax obligations, rights, and procedures (Oyedele, 2009). Effective programs foster voluntary compliance, reduce evasion, and strengthen trust between taxpayers and authorities (Normala, 2007).

1.2 Statement of the Problem

While tax education positively influences compliance (Stiglitz, 2015), Uganda’s revenue performance lags behind regional peers. Despite reforms—including taxpayer sensitization and expanded registration—low compliance persists due to poor enforcement, exemptions, and limited taxpayer awareness (Ali, 2014). Hostility between taxpayers and URA further complicates compliance (Mawejje, 2014). This study investigates how enhanced tax education could improve income tax performance.

1.3 Objectives of the Study

Main Objective:
To assess the impact of tax education on income tax performance in Uganda.

Specific Objectives:

1. Evaluate the extent of tax education in Uganda.
2. Examine trends in annual income tax revenue collection.
3. Identify factors influencing income tax performance.
4. Recommend policies to enhance income tax efficiency.

1.4 Research Questions

1. What is the current level of tax education in Uganda?
2. How much income tax revenue does Uganda collect annually?
3. What factors determine income tax performance?
4. What policies can improve income tax efficiency?

1.5 Scope of the Study

• Content Scope: Tax education, income tax performance determinants, and policy recommendations.
• Geographical Scope: URA Nakawa, Kampala.
• Time Scope: July 2006–May 2007 (period of notably low income tax contributions).

1.9 Significance of the Study

• Academic Contribution: Provides insights for future research on tax education and compliance.
• Policy Relevance: Informs URA management on strategies to enhance revenue collection.
• Practical Application: Guides improvements in taxpayer engagement and administrative efficiency.

Key Improvements:

1. Conciseness: Removed redundancies while preserving key details.
2. Clarity: Simplified complex sentences for better readability.
3. Flow: Improved logical progression between sections.
4. Professional Tone: Maintained formal academic language.