Income tax administration and profitability of small-scale business enterprises in Soroti city:

Abstract

Income tax administration plays a pertinent role regarding revenue collection as well as profitability of any business entity. In an effort for the government to increase its tax base, the tax burden for many firms increases. However, the tax administration system is poor as at limes, the tax liability computation is based on estimates, records of many small business firms are incomplete, and some miss out completely leading to over charge. In return, this directly affects the profitability of the enterprise and may threaten its survival because taxes are paid out of profits.

The purpose of the study is to establish the effect of income tax and administration on the profitability of small-scale business enterprises in Soroti City. The study applied both qualitative and quantitative research designs where interviews and Questionnaires were used. Data was collected from both primary and secondary sources. Data was processed and analyzed using formal tables, pie charts, graphs, narrative text, and correlation to find out the relationship between income tax administration and. profitability of small-scale businesses. A total of respondents were considered out of the entire population in the Town Council.

The findings revealed that income tax administration is poor and this way shown in the findings that indicated that the business community is not adequately sensitized; tax rates are at times high and they are based on estimates. Tax rates do not take in to account the circumstances in which small businesses operate, that' has negatively the profitability the small-scale businesses leading to low capital employed, high expenses incurred, low sales made and the average amount of taxes paid annually being so high. In conclusion, therefore, URA needs to carry out an extensive survey-based analysis of small firms profit margins to determine presumptive tax rates, which will not affect the small business earners.

The researcher therefore, recommended that, URA; should supply tax. assessment forms in time, intensity on the sensitization campaigns of the taxpayers, employ competent staff educate the business community about its different tax rates and introduce a scheme that allows taxpayers to pay the tax obligation in installment to better the profitability of small-scale. businesses. There is therefore need for mote research on firms’ management techniques, the role of bookkeeping and profitability of small and mid-size enterprise.