Income Tax Assessment And Performance Of Small Scale Businesses In Busia Municipality

BSTRACT

The study was conducted under the topic "Income Tax Assessment on small

Business Enterprises", in Busia Municipality. The aim of the study was to

determine the effect of Income tax assessment on performance of small scale

businesses. The research instruments used for data collection are Interview

guide, questionnaires, Observation, sampling and data Analysis.

The data analysis technique used was the chi-square whose formula is

XZObs = '' (fo- fe)Z

L fe

The researcher made the following findings in accordance with the study

objectives:

Business people need to ensure that they maintain proper books of accounts

that are written comprehensively; general journals, inventory records, fixed

assets register, pay roll records, cash book, Vouchers, receipt books and

invoices. And any amount derived by a person as consideration for accepting a

restriction on the person's capacity to carry on business constitutes the scope

of business income. Sales derived by a person from disposal of trading stock as

well as the value of any asset derived by a person by virtue of a past present or

prospective business relationship includes Business income. When a business

is of a profit seeking motive, then it qualifies to be grouped under business

income. The researcher also found out that the nature of the asset and the

interval between purchase and sale, determines whether such asset qualifies to

be grouped under business income. Allowable and capital deductions are

among the factors to consider when determining taxable income.

From the above findings the researcher made the conclusion that, For

businesses to prosper there is need for businesses owners to maintain proper

records, understanding the scope of business income, be able to know that

there are a number of other business incomes other than the presumptive tax

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payers as well as be familiar with key factors which are considered crucial in

determining business taxable income.

From the above conclusion the researcher made the following recommendation:

Small scale business operators should be encouraged to maintain a full set of

books for income tax assessment purpose, to seek advice from tax consultants

in order for their businesses to prosper. The government should also endeavor

to educate small scale business operators on factors which are considered

crucial in determining taxable business income such as allowable deductions,

non allowable deductions, and capital deductions. Small scale tax payers

should be able to know that there are a number of other business incomes that

are liable to taxation apart from business profits. Small scale business

operators should be offered tax holidays to enable them compete favorably with

other foreign businesses that benefit from such tax holidays. Uganda revenue

authority (URA) should intensify sensitization programs focusing on small scale

business operators so that they are able to respond to paying of tax without thinking they are being exploited.