Uganda Christian University https://ucudir.ucu.ac.

ug/

ELECTRONIC TAX SYSTEM AND TAX COMPLIANCE IN UGANDA

A CASE STUDY OF NAKAWA DIVISION

BY

NAKITENDE MOUREEN

REG NO: EJ18M15/152

A RESEARCH DISSERTATION SUBMITED TO THE FACULTY OF BUSINESS AND

ADMINISTRATION IN PARTIAL FULFILMENT OF THE REQUIREMENTS FOR
THE AWARD OF A MASTER’S DEGREE IN BUSINESS ADMINISTRATION OF
UGANDA CHRISTIAN UNIVERSITY, MUKONO

DECEMBER, 2019
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DECLARATION

I, NAKITENDE MOUREEN, declare that this is my original research dissertation and has not
been presented in any Institution of higher learning for any academic award.

Signature ………………………… Date………………………

NAKITENDE MOUREEN

REG NO: EJ18M15/152

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APPROVAL

This is to certify that this research dissertation titled electronic tax system and tax compliance in
Uganda by Nakitende Moureen has been conducted under my supervision and is now ready for
submission to the faculty for examination

Signature: ………………………….. Date: …………………………………

MR. HENRY MUGISA
RESEARCH SUPERVISOR

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DEDICATION

This work is dedicated to my beloved mother for the moral, spiritual and financial support that
you gave me at all stages of my studies. Your support and care gave me a positive transformation
in life and may the almighty God bless you abundantly.

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ACKNOWLEDGEMENT

I am grateful to the almighty God who has given me life and enabled me to overcome all sorts of
obstacles and enabled me to complete this research dissertation successfully.

To my supervisor Mr. Henry Mugisa, your guidance, suggestions, constructive criticisms and
encouragements at all stages during the course of this research dissertation have all been
intellectually resourceful and supportive without which I would not have completed. May God
bless you.
I am also grateful to the SMEs in Nakawa Division for availing me with data without any
hesitation and delays.

My acknowledgement with deep gratitude goes to all my friends for their academic and moral
support especially their words of encouragement that made this research dissertation a success,
may the Almighty God reward them with joy and peace.

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TABLE OF CONTENTS

DECLARATION ...................................................................................................................... i
APPROVAL ............................................................................................................................ ii
DEDICATION........................................................................................................................ iii
ACKNOWLEDGEMENT ...................................................................................................... iv
TABLE OF CONTENTS ........................................................................................................ v
LIST OF TABLES................................................................................................................ viii
LIST OF FIGURES ................................................................................................................ ix
LIST OF ACRONYMS ........................................................................................................... x
ABSTRACT ........................................................................................................................... xi
CHAPTER ONE ...................................................................................................................... 1
INTRODUCTION ................................................................................................................... 1
1.1 Introduction ....................................................................................................................... 1
1.2 Background to the study .................................................................................................... 1
1.3 Statement of the Problem .................................................................................................. 3
1.4 General objective ............................................................................................................... 4
1.5 Specific objectives of the Study ........................................................................................ 4
1.6 Research Questions............................................................................................................ 4
1.7 Justification of the study .................................................................................................... 4
1.8 Scope of the Study ............................................................................................................. 5
1.9 Conceptual framework ...................................................................................................... 6
1.10 Operational definitions of the key words ........................................................................ 8
1.11 Summary of the chapter ................................................................................................... 8
CHAPTER TWO ..................................................................................................................... 9
LITERATURE REVIEW ........................................................................................................ 9
2.1 Introduction ....................................................................................................................... 9
2.2 Theoretical review ............................................................................................................. 9
2.3 Conceptual review ........................................................................................................... 10
2.4 Actual review of the objectives of the study ................................................................... 12
2.4.1 The effect of electronic tax system on tax compliance ................................................ 12
2.4.2 The challenges faced by tax payers in using electronic tax system.............................. 14

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2.4.3 The ways of improving electronic tax system to enhance tax compliance .................. 16
2.5 Summary of literature review .......................................................................................... 18
2.6 Literature gap................................................................................................................... 18
CHAPTER THREE ............................................................................................................... 19
RESEARCH METHODOLOGY .......................................................................................... 19
3.1 Introduction ..................................................................................................................... 19
3.2 Research design ............................................................................................................... 19
3.3 Study Population.............................................................................................................. 19
3.4 Sample size ...................................................................................................................... 20
3.5 Sampling technique ......................................................................................................... 20
3.6 Data collection methods .................................................................................................. 21
3.7 Data Collection Instrument .............................................................................................. 21
3.7.1 Questionnaires .............................................................................................................. 21
3.7.2 Interviews ..................................................................................................................... 21
3.8 Validity and Reliability ................................................................................................... 22
3.8.1 Validity ......................................................................................................................... 22
3.8.2 Reliability ..................................................................................................................... 22
3.9 Procedure of Data Collection. ......................................................................................... 22
3.10 Data Analysis................................................................................................................. 23
3.10.1 Quantitative data analysis ........................................................................................... 23
3.10.2 Qualitative data analysis ............................................................................................. 23
3.11 Measurement of the variables ........................................................................................ 23
3.12 Ethical issues ................................................................................................................. 24
3.13 Limitations to the study ................................................................................................. 24
3.14 Conclusion ..................................................................................................................... 24
CHAPTER FOUR ................................................................................................................. 25
PRESENTATION, INTERPRETATION AND ANALYSIS OF RESEARCH FINDINGS 25
4.1 Introduction ..................................................................................................................... 25
4.2 Response Rate.................................................................................................................. 25
4.3 Background Characteristics of Respondents ................................................................... 26
4.3.1 Gender of the respondent .............................................................................................. 26

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4.3.2 Age of the respondents ................................................................................................. 26

4.3.3 Education level of the respondents ............................................................................... 27
4.3.4 Marital status of the respondents ............................................................................ 28
4.3.5 Experience in running the enterprise ............................................................................ 29
4.4 The effect of electronic tax system on tax compliance ................................................... 30
4.5 The challenges faced by tax payers in using electronic tax system................................. 35
4.6 The ways of improving electronic tax system to enhance tax compliance ..................... 38
4.7 The relationship between electronic tax system and tax compliance .............................. 42
4.8 Multiple Regression Analysis.......................................................................................... 43
4.9 Analysis of Variances (ANOVA) .................................................................................... 44
CHAPTER FIVE ................................................................................................................... 45
SUMMARY, DISCUSSION, CONCLUSION AND RECOMMENDATIONS ................ 45
5.1 Introduction ..................................................................................................................... 45
5.2 Summary and discussion of major findings .................................................................... 45
5.2.1 The effect of electronic tax system on tax compliance ................................................ 45
5.2.2 The challenges faced by tax payers in using electronic tax system.............................. 45
5.2.3 The ways of improving electronic tax system to enhance tax compliance .................. 46
5.3 Conclusions ..................................................................................................................... 46
5.4 Recommendations ........................................................................................................... 46
5.5 Areas of future research ................................................................................................... 47
5.6 Chapter conclusion .......................................................................................................... 47
References ............................................................................................................................. 48
APPENDICES ....................................................................................................................... 57
APPENDIX 1: QUESTIONNAIRE ...................................................................................... 57
APPENDIX 2: INTERVIEW GUIDE ................................................................................... 61

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LIST OF TABLES

Table 3.1: Sample size ……………………………….…………………………………...20

Table 4.1: Response rate ………………………………………………………………….25

Table 4.2: Gender of respondents ………………………………………………………...26

Table 4.3: Age of the respondents ………………………………………………………..27

Table 4.4: Education level of the respondents ……………………………………………28

Table 4.5: Marital status of the respondent ……………………………………………….28

Table 4.6: Experience in running the enterprise ………………………………………….29

Table 4.7: The effect of electronic tax system on tax compliance ……………………….30

Table 4.8: The challenges faced by tax payers in using electronic tax system …………..35

Table 4.9: The ways of improving electronic tax system to enhance tax compliance …...39

Table 4.10: The relationship between electronic tax system and tax compliance ………..42

Table 4.11: Multiple Regression Analysis ………………………………………………..43

Table 4.12: Analysis of Variances ……………………………………………………..…44

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LIST OF FIGURES

Figure 1: Conceptual framework …………………………………………………………7

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LIST OF ACRONYMS

EARAs: East African Revenue Authorities

EBM: Electronic Billing Machines

ICT: Information Communication Technology

IRS: Internal Revenue Service

PEOU: Perceived Ease of Use

PIN: Personal Identification Number

PU: Perceived Usefulness

SARS: South African Revenue Service

SMEs: Small and Medium Enterprises

SPSS: Statistical Package for the Social Sciences

TAM: Technology Acceptance Model

TRA: Theory of Reasoned Action

URA: Uganda Revenue Authority

VAT: Value Added Tax

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ABSTRACT

This study set to examine electronic tax system and tax compliance in Uganda. The study
examined the effect of electronic tax system on tax compliance, established the challenges faced
by the tax payers in using electronic tax system and suggested ways of improving the electronic
tax system to enhance tax compliance.

A descriptive survey design using a sample of 242 respondents was adopted. Simple random
sampling and purposive sampling techniques were used to select the respondents and data was
collected using well designed structured questionnaires and interview guide.

Findings reveal that e-filing is easy for taxpayers which increases tax compliance as reflected by
a mean value of 4.45. It was also established that tax payers are faced with a challenge of
intermittent power supply and Internet outages and this is revealed by a mean of 3.63. It was also
established that the use of automation of revenue collection system increases the revenue
collection as shown by a mean value of 3.48.

In conclusion, there is a direct relationship between internet payment system, electronic billing
machine, mobile payment system and tax compliance.

The study recommends that URA should adopt the use internet payment system to allow tax
officers to issue assessments and refunds more quickly and lower corruption by reducing face-to-
face interactions. URA should adopt the use mobile tax payment system so that clients can pay
tax easily from anywhere by use of their mobile phone. In addition,EBM should be provided to
different business enterprises across the country for easy accessible by customers, so that quick
service and convenience is maintained hence increasing tax compliance.

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CHAPTER ONE

INTRODUCTION

1.1 Introduction

This chapter presents, background to the study, statement of the problem, research objectives and
questions, scope of the study, justification of the study, significance of the study and finally
definition of key terms. The study seeks to examineelectronic tax system and tax compliance in
Uganda.

1.2 Background to the study

Tax compliance is very important for every government in the world as it enables the
government to acquire assets which are not liable to debt and which the government uses to
develop its economy (Ngotho & Kerongo, 2014). However, studies and other journal publication
have shown that most governments face serious challenges in their revenue collection
performance where governments are not able to collect sufficient funds to cover their budget
expectations (Balunywa et al., 2014). For years, revenue collectors have not been channeling all
the amount of money they collect to the Country Treasury (Ngotho & Kerongo, 2014).

For instance, revenue collection staff may collude with the revenue payers to avoid paying the
prescribed charges and instead bribe the collector to shield against paying the correct amount to
Tax Authority. The net effect could be a bigger loss, which would deter economic development
of the country, growth, and improved service delivery (Namoit, 2012). To eliminate or
significantly reduce corruption, achieve the country’s financial objective and simplify payments,
the Electronic Tax System has been introduced (Njanja, 2014). In fact, the world has witnessed
an increase of Electronic Tax System meant to facilitate elimination of losses of revenue through
corruption (Balunywa et al., 2014).

Electronic Tax System has been given attention through the increase in the use of information
technology and this affects the tax administration. Nisar (2013) argues that current problems in
public taxation stress the need of developing a system of tax assessment and collection that

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involves internet services. Therefore, Electronic Tax System is an online platform whereby the
taxpayer is able to access through internet all the services offered by a financial authority such as
the registration for personal identification number, filing of returns, payment of taxes and
application for compliance certificate.

In United States of America, the introduction of electronic tax administration including

electronic tax filing (e-filing) has been the largest in terms of citizens affected. Starting in the
1980s as a partnership between the Internal Revenue Service (IRS) and the tax preparer H&R
Block, the program has developed to a successful public-private partnership. In fact, the IRS has
been described as one of the most efficient tax collection agencies in the world (Fletcher, 2003).
Recent announcements by the IRS indicate that e-filing has increased at an impressive rate since
its introduction in the late 1990s. Statistical analysis shows that e-filing for individual taxpayers
increased from an average of about 23% in 1999 and approximately 60% in 2007. More recent
IRS information indicates an individual e-filing rate of 61% in 2008 and 69% in 2009 (Pippin
and Tosun, 2014).

In South Africa, SARS e-filing is the official online tax returns submission portal for South
African Revenue Service launched originally in 2001 through third-party companies, then
expanded and taken in-house by SARS in 2006. In the 2015/2016 tax year, SARS e-filing
processed 36.80 million electronic submissions and payments which is equivalent to 98.7% of all
submissions and payments to SARS in South Africa (South African Government News
Agency,2016). SARS e-filing is a free, online process for the submission of returns and
declarations and offer other related services.

Uganda Revenue Authority in 2005 embarked on a modernization drive that has culminated into
an ambitious computerized system called electronic tax. The objective of the new system is to
reduce the cost of tax payer complying with URA (Musoke and Mugalu, 2010). The purpose of
electronic tax system and the domestic tax modernization program was to remove the
inefficiencies associated with costs of movement by tax payers to URA offices to do business
and present to tax payers a system that reduces their cost of compliance (Uganda Revenue
Authority, 2009).

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Electronic tax system forms part of the revenue collection reforms by Uganda Revenue
Authority whose main motive is enhancing tax collections and increase revenue collection and
thus, tax revenues have been increasing rapidly due to the country's rapid economic development
accelerated by the new systems. In this regard, the planning and formulation phase of an
elaborate electronic system strategy was done in the Uganda Revenue Authority Corporate Plan
of 2009 and was implemented in the fourth corporate plan of 2011 (Ngotho & Kerongo, 2014).

Despite the introduction of the electronic tax systems to enhance tax compliance, levels of tax
compliance remain low not only in Uganda but East Africa at large. This is evidenced in the East
African Revenue Authorities Comparative Revenue Analysis Report of 2015 / 2016 that was
published in May 2017, that one of the major challenges faced by the EARAs in revenue
mobilization is low compliance levels.

In addition, since the inception of the electronic tax system by URA in June 2009, it is not clear
how the new system has improved tax collection, enhanced administration, reduced compliance
costs and improved tax compliance hence necessitating this study.

1.3 Statement of the Problem

Currently, URA trains taxpayers, organises workshops and seminars with an aim of informing
the public about electronic tax systems. Despite of the introduction of electronic tax system, tax
compliance levels remain low and tax collections are below the targets set by URA
(Kabafunzaki, 2010). This is evidenced in the Revenue Performance Report of FY 2017/2018
which shows that net revenue collection of UGX 14,456.11 billion was collected. However, the
collections were UGX 606.32 billion below the FY 2017/2018 target of UGX 15,062.43 billion
(URA Revenue Performance Report, 16th July 2018). In financial year 2016/17, URA was given
a net revenue target of UGX 13,177.15 billion but the net revenue collections for FY 2016/17
were UGX 12,719.63 billion with a deficit of UGX 457.51billion below the FY 2016/17 target
(URA Revenue Performance Report, 2016/2017). In addition, the East African Revenue
Authorities Comparative Revenue Analysis Report of 2015/2016 that was published in May
2017 points out that one of the major challenges faced by the EARAs in revenue mobilization is

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low compliance levels. It was against this background that the researcher seeks to examine the
effect of electronic tax system on tax compliance in Uganda.

1.4 General objective

The general objective of this study was to examine the relationship between electronic tax
systemandtax compliance in Uganda.

1.5 Specific objectives of the Study

The study was guided by the following objectives;

i. To examine the effect of electronictax system on tax compliance.

ii. To establish the challenges faced by the tax payers in using electronic tax system.
iii. To suggest ways of improving the electronic tax system to enhance tax compliance.

1.6 Research Questions

The study attempted to answer the research questions below;

i. What is the effect of electronictax system on tax compliance?

ii. What challenges are faced by the tax payers in using electronic tax system?
iii. What are the ways of improving the electronic tax system to enhance tax compliance?

1.7 Justification of the study

The Ugandan government relies heavily on taxes to fund its development expenditure. An
increase or decline in tax revenues has a direct bearing on the economy of Uganda as a country.
The study is likely to reveal the strengths or weaknesses associated with implementation of
electronic tax system and its benefits not only to the authority but also to taxpayers thereby,
increasing the rate of tax compliance in Uganda.

The finding of this study may be of great importance to Uganda Revenue Authority in
establishing the impact of electronic tax system on tax compliance in terms of whether it leads to
growth or decline of revenue collections. The Authority may also use the study to identify user

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interaction challenges that can be improved for the smooth running of the system. The Authority
may also observe and take note of the effect of electronic tax system on the cost of revenue
collection.

The study findings may reveal the strengths or weaknesses associated with the implementation of
new technology and its benefits to taxpayers.

Other government agencies may benefit from this study in understanding early the
implementation challenges they might face in the application of online systems and also
predictable end user reactions to the systems.

The findings of the study may also contribute to the existing body of knowledge and may form
the basis for further research in the area of technology and tax compliance in Uganda.

1.8 Scope of the Study

This sub section covered content scope, geographical scope, and time scope.

Content scope

The constructs studied were; electronic tax system (internet payment system, electronic billing
machine and mobile payment system) and tax compliance in Uganda.

Geographical scope

The study was carried out in Nakawa division located in Central Uganda. Nakawa Division lies
in the eastern part of the city, bordering Kira Town to the east, Wakiso District to the
north, Kawempe Division to the north-west, Kampala Central Division to the west, Makindye
Division across Murchison Bay to the south-west and Lake Victoria to the south. The
coordinates of the division are 0°20'00.0"N, 32°37'00.0"E (Latitude:0.333333,
Longitude:32.616667). The location was appropriate because it has a large number of small and
medium enterprises (Uganda Small Scale Industries Association 2016) and (Uganda Bureau of
Statistics report 2017); there is a total of 1525 SMEs operating in Nakawa Division.

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Time scope

Interest was in information relating to the period between 2012 and 2017. The period identified
was expected to avail information that was fresh and recent. This period also shows low revenue
collection with an increase in FY 2017/2018 according to URA.

1.9 Conceptual framework

According to Hobbs and Norton (2016), a conceptual framework is an analytical tool with
several variations and contexts. It can be applied in different categories of work where an overall
picture is needed. It is used to make conceptual distinctions and organize ideas. Strong
conceptual frameworks capture something real and in a way that is easy to remember and apply.

The relationship of the independent variable (electronic tax systems) was reviewed to establish if
there was any relationship between the three factors that is internet payment system, electronic
billing machine and mobile payment system and tax compliance, a dependent variable measured
by tax registration, tax filling, correct reporting and tax payment. Internet payment system is
paramount in ensuring optimal revenue collection (Ndundaet al., 2015).Electronic Billing
Machines have helped to cut down time spent on screening books of accounts which increases
tax compliance by tax payers (Jahirul, 2016).Customers can pay their bills without having to
actually move to the bank’s premises using (Pariwat & Hataiseere, 2014).

The computer literacy level (Technical knowhow) and accessibility to internet (Network)
infrastructure has a direct impact towards the use of the online tax returns (Auyat, 2013). The
online tax services are often internet based platforms and basic knowledge of the usage of the
internet is required (Azmi & Bee, 2011). In this context, the user must be able to self-navigate on
the web-based platform with minimal difficulties if any and use the self-help menus available in
the website (Hussein et al., 2010).

According to Mandola (2013), any online e-government services need to be easy to use to enable
those with little internet experience to effectively use the service. In this context, she found a
correlation between an individual’s internet experience, the availability and access to internet

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facilities, and the ease in which the potential user can learn and use e-government services such
as online filing.

The non-availability of internet has a direct impact on tax compliance. This is because for e-
filing, tax registration, tax payment tax reporting to be a success, there should beinternet
connectivity and without it, all the above do not succeed.

Figure 1: Conceptual framework

INDEPENDENT VARIABLE DEPENDENT VARIABLE

Electronic Tax Systems Tax compliance

 Tax registration
 Internet payment system
 Tax filing
 Electronic billing machine
 Correct reporting
 Mobile payment system
 Tax payment

MODERATING VARIABLES

 Network availability
 Technical knowhow

Source;The framework is developed using ideas from different scholars like Andreoni, et al.
(1998); Auyat (2013);Azmi & Bee (2010); Jahirul (2016);Mandola (2013); Ndunda et al.
(2015); and Pariwat & Hataiseere (2014).

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1.10 Operational definitions of the key words

1.10.1 Electronic tax system: According to Dowe (2010), electronic tax system is a
computerized tax administration system that is especially designed to handle general tax
administration from registration, assessment, filing returns and processing of claims and refunds.

1.10.2 Tax Compliance: According to Allink and Kommer (2010), tax compliance is the timely
filing and reporting of required tax information, the correct self-assessment of taxes owed, and
the timely payment of those taxes without enforcement action.

1.10.3 E-filing: According to Allink and Kommer (2010), e-filing refers to the transmission of
tax information directly to the tax administration using the internet.

1.10.4 E-payment: According to Allink and Kommer (2010), e-payment is defined as the
transfer of money from a person’s bank account to the tax administration’s bank account using
the internet.

1.11 Summary of the chapter

The chapter started with an introduction which outlined the key areas covered, this was followed
by the background to the study. The Chapter proceeded with problem statementand handled the
objectives of the study as well as research questions which were basically derived from the
researchobjectives. Scopeof the study was determined as content, geographical and time. The
chapter tackled justification of the research and lastly handled operational definition of key
terms.

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CHAPTER TWO

LITERATURE REVIEW

2.1 Introduction

This chapter presents literature on the theoretical and conceptual review, the effect of electronic
tax system on tax compliance, the challenges faced by tax payers in using electronic tax system
and ways of improving the electronic tax system to enhance tax compliance. This was used to
compare and establish the variations and/or similarities between this study findings and what
literature provides.

2.2 Theoretical review

This study adopted Technology Acceptance Model (TAM) as the theoretical basis for analyzing
and understanding electronic tax system and tax compliance in Uganda.The theory suggests that
perceived usefulness (PU) and perceived ease of use (PEOU) of IT are major determinants of its
usage. Perceived usefulness (PU) was defined as a person’s belief that using a particular system
would enhance his or her job performance and perceived ease of use (PEOU) was defined as a
person’s belief that using a particular system would be free of effort. Both PU and PEOU jointly
influence citizens’ intention. Davis et al. (1989) assert thatthe key purpose of Technology
Acceptance Model (TAM) is to provide a basis for tracing the impact of external factors on
internal beliefs, attitudes and intentions. Behavior Intention (BI) is a measure of the strength of
one’s intention to perform a specified behavior. According to intention-based theories, user
adoption and usage behavior are determined by the intention to use IT. It is a kind of “self-
prediction” or “behavioral expectation”, indicated as one of the most accurate predictors
available for an individual’s future behavior (Davis, 1989). In predicting usage; TAM model
might be useful within and across organizations for evaluating applications or technologies, or to

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make comparisons between user groups or applications. This theory was relevant to the study as
it emphasizes that using a particular system enhances compliance.

2.3 Conceptual review

Gellis (2011) describes electronic tax system as an online platform whereby the taxpayer is able
to access through internet all the services offered by a financial authority such as the registration
for a personal identification number, filing of returns and application for compliance certificate.
Electronic taxation is an antagonistic process for collecting, evaluating and automating tax-
related processes in order to increase productivity (Fu, Farn and Chao, 2016).

Electronic tax system is the system that has been developed to replace the old manual system. It
is a web-enabled and secure application system that provides a fully-integrated and automated
solution for administration of domestic taxes. It Enables Taxpayer internet based PIN
registration, returns filing, payment registration to allow for tax payments and status inquiries
with real-time monitoring of accounts (Waweru 2013). Gellis (2011), describes electronic tax
system as an online platform whereby the taxpayer is able to access through internet all the
services offered by a financial authority such as the registration for a personal identification
number, filing of returns and application for compliance certificate. Electronic taxation is an
antagonistic process for collecting, evaluating and automating tax-related processes in order to
increase productivity (Fu, Farn and Chao, 2016).

Andreoni, Erard, and Feinstein (2008) defined tax compliance as taxpayers’ willingness to obey
tax laws in order to obtain the economy equilibrium of a country. Kirchler (2007) perceived tax
compliance as the most neutral term to describe taxpayers’ willingness to pay their taxes.
Somasundram (2013) defined tax compliance as taxpayers’ ability and willingness to comply
with tax laws which are determined by ethics, legal environment and other situational factors at a
particular time and place. Similarly, tax compliance is also defined by several tax authorities as
the ability and willingness of taxpayers to comply with tax laws, declare the correct income in
each year and pays the right amount of taxes on time (Internal Revenue Service Act, 2000
Act592). Alm (2011) defined tax compliance as the reporting of all incomes and payment of all
taxes by fulfilling the provisions of laws, regulations and court judgments.

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Maxwell, (2013) defines tax compliance as the degree to which the tax paying community meets
the tax obligation as set out in the appropriate legal and regulatory provisions. According to
Maxwell, taxpayer compliance depends on economic incentives embedded in the tax structure
and the effectiveness in detecting and penalizing non-compliance. According to Sarker (2013),
Tax compliance can be defined as the degree to which a taxpayer complies (or fails to comply)
with the tax rules of his/her country.

Tax compliance is the degree to which a taxpayer complies with the tax rules of his country. This
also means making tax payments and producing and submitting tax returns to the tax authorities
on time and in the required formats. The issue of tax compliance has been a vibrant issue in the
tax word in Nigeria. Most citizens have the view that since the government doesn’t provide us
with the basic amenities needed, why pay tax? This is commonest reaction you get from citizens
who evade taxes. Tax evasion cannot be totally eliminated but can be controlled by the tax
authority. A more appropriate definition of compliance could include the degree of willingness to
complying with tax laws and administration that can be achieved without immediate threat or
actual application of enforcement activity. Tax compliance can be viewed in terms of tax
avoidance and evasion. These two are distinguished in terms of legality, tax avoidance is legal
while tax evasion is illegal. Compliance might therefore be better defined in terms of compliance
with the tax laws of the nation (James et al., 2005).

Tax Compliance can be referred to as the process in which tax returns required to be submitted to
the tax authorities are filed at the appropriate time with the accurate tax liability as required
under the tax laws and regulations of a country (Friedman, 2011).Palil (2010) tax compliance is
defined as taxpayers’ willingness to comply with tax laws, declare the correct income, claim the
correct deductions and exemptions, and pay all taxes on time. Tax compliance is the value of
taxpayer’s own timed and resources, along with any out of pocket costs paid to tax preparers and
other advisors, invested to ensure compliance with the laws (Holtzman, 2007). Compliance with
the tax laws typically means true reporting of the tax base, correct computation of the liability,
timely filing of the return and timely payment of the amounts due (Franzoni, 1999). Tax
compliance is the provision of tax information at the proper time and ensuring that returns
accurately report the tax liability (Carroll, 2007).

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2.4 Actual review of the objectives of the study

2.4.1 The effect of electronic tax system on tax compliance

Jayakumar & Nagalakshmi (2016) stated that a well-designed electronic system can lower
corruption by reducing face-to-face interactions. To ensure that taxes are collected efficiently
and reduce opportunities for corruption, a generally accepted principle is that tax authorities
should not handle money directly. Ideally, tax officials should have little direct contact with
taxpayers and so less discretion in deciding how to treat them (Geetha & Sekar, 2014). E-filing is
also easy, flexible and convenient for taxpayers. E-filing makes it possible to file returns from a
taxpayer’s home, library, financial institution, work place, tax professional’s business or even
stores and shopping malls. With an integrated e-filing and e-payment system, taxes can be filed
and paid online from any place.

Lai (2015) conducted a study titled “Influencing Tax Compliance in SMEs through the Use of
ICTs” and argued that Revenue collection is an important determinant of the economy of any
country. The adequacy of government revenues allows the government to support its operations
ranging from administrative activities, infrastructure constructions and service provision. The
study aimed to show how e-transparent services address the challenge of voluntary tax
compliance by SMEs in the republic of Tanzania. The study observed the following factors to
influence voluntary compliance: Awareness of tax laws, business experience, the integrity of
employees, low frequency of visitation by tax officers and training needs. Recommendations
read that the revenue authority must use relevant ICT tools to positively promote these factors; as
a result, the position of taxpayers to voluntarily file their tax returns will be enhanced.

E-filing systems increase the quality and quantity of information available to tax officers,
enabling them to complete transactions faster and more accurately (Jahirul, 2016). Re-turns filed
electronically have much lower error rates than paper returns and substantially cut the need to
impose penalties and other disciplinary measures to foster compliance. The more efficient
handling provided by electronic returns allows tax officers to issue assessments and refunds
more quickly, and taxpayers know right away if their returns have been accepted by the tax
authorities. E-filing lowers the cost of handling returns allowing administrative resources to be

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reallocated to other tasks such as auditing, customer services and tracking non-compliance
(Geetha & Sekar, 2014). The benefits of e-filing and e-payment systems extends to other
electronic processes in the tax authority. E-filing and e-payment allow for better, safer data
storage that can be used to implement a risk management system for auditing and enforcement.
Automation helps establish a good system for tracking case files, which is essential for effective
auditing and increases the speed and quality of data provided to auditors. In addition, e-filing
systems are usually complemented by software that standardizes and facilitates processes for
taxpayers, making compliance easier (Gupta, 2012).

According to Jahirul (2016), Electronic Billing Machines have helped to cut down time spent on
screening books of accounts. Auditors used to spend hours investigating and going over massive
documentation but with the EBM, audits are easily conducted and by use of Electronic Billing
Machines, URA is now able to catch tax evaders with less effort. The same technology is used in
countries such as Sweden, Germany, Greece, Ethiopia and Kenya to combat tax evasion because
every registered machine records all transactions and indicates Value Added Taxes expected to
be remitted to government funds. The use of Electronic Billing Machines discourages some
taxpayers who were fond of keeping two receipt books or non-issuing tax receipts to clients,
irrespective of the quantities bought, which encouraged tax evasion.

The best way to use EBMs to improve VAT compliance is to introduce them alongside two
complementary interventions (Mascagni, 2016). Firstly, there is need for interventions that
reinforce the issuing of EBM receipts where non-compliance is identified (receipt audits). These
also provide data to establish true patterns of sales, which is used by the second intervention
type. This second intervention uses targeted data analytics that automatically identifies when a
firm is engaged in ‘irregular’ or ‘suspicious’ behaviour (e.g. issuing much fewer receipts than
usual, issuing receipts without buyer-firm corroboration, or misclassifying items). The most
powerful way in which EBMs can reinforce voluntary VAT compliance is by taking both
approaches jointly; a data-driven approach to ‘spot’ irregular patterns and automatically ‘remind’
EBM users of non-complying behaviour.

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E-payment has been designed to help individual customers and companies as well as the banks in
eliminating or reducing some of the problems inherent in the settlement and payment process.
Customers can pay their bills without having to actually move to the bank’s premises (Pariwat
&Hataiseere, 2014). They may also have access to their account information and even transfer
money to other accounts in the comfort of their homes.

The implementation of e-payment is paramount in ensuring optimal revenue collection. Various

ICT based revenue collection applications are available for use in the modern world today. These
are simply referred to as Electronic Payment (E- payment) system (Ndundaet al., 2015),
integrated into revenue collection. The E-payment system is accessible online through Point of
Sale (PoS) terminal devices and physical agents (such mobile phones, debit cards, agents, mobile
money). The E-payment is intended to help the companies using it to eliminating or reducing
and minimizing corruption (some of the problems inherent in the settlement and payment
process), by allowing customers to pay their bills without having to actually move to the firm
premises. The customers have access to their account information and even transfer money to
other accounts in the comfort of their homes (Wahab, 2012).

2.4.2 The challenges faced by tax payers in using electronic tax system

In Uganda, Akello (2014) reported that there are challenges such as intermittent power supply
and Internet outages but says the tax body has made contingency plans to ensure that the system
is operational 24/7. First, the e-Tax is hosted on a central server at their Kampala headquarters,
which means that it’s not affected by power or network outages even when power or the Internet
is off in some parts of the country. The electronic filing process still confuses a lot of people
because the web portal has many features and yet most people cannot understand some tax terms.

Sheikh (2015) explains that as with any new system, there have been numerous teething
problems with the electronic system. First, there are two concurrent tax systems, manual and i-
Tax systems, without either system recognizing the other. Taxpayers are also receiving demand
emails from the Integrated Tax Management System. This is bound to create discrepancies in
taxpayers’ records, especially with regards to payment of tax obligations as well as submitting

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returns. For instance, in the current setup, if a taxpayer pays taxes manually, the i-Tax system
will not recognize the payment. Instead, the system automatically calculates penalties and
interest on the perceived “missed” tax payments thereby leading to potential disputes between
the URA and the taxpayer. Second, the i-Tax system lacks historical records of taxpayers. Its
record keeping is a “going forward” type in that it only stores tax records of taxpayers from the
time of registering for i-Tax onwards (Sheikh, 2015).

According to Lubua (2014), employees play a vital role in ensuring that the revenue authority
collects its tax from clients at the right time. They also ensure that clients have the right
knowledge of business taxation. Low integrity to employees is reported to significantly affect
efforts by the revenue authority toward improving revenue collection. To a large extent, the use
of ICTs in the Tanzanian revenue authority has addressed the challenge of corruptive behavior
by employees. In areas such as custom department, clients are able to conduct own assessments.
However, in domestic revenue there is a low usage of ICTs. Clients depend on employees for
assessment and this assessment depends on employees’ rational ability and integrity.

According to Tan and Foo (2015), one of the first challenges of e-filing is security of personal
data and tax data. Many other taxpayers still reject the idea of using e-filing due to the risk
perception associated with it. According to Tan and Foo (2015), this risk perception could
significantly influence the taxpayer’s or users’ intention to use it. The most widely known risk
that everyone refers to is lack of internet security. Another risk which Tan and Foo (2015) talk
about is the possibility that confidential personal information could be intercepted and stolen by
fraudster during transmission.

Empirical evidence shows that there is resistance to the use of e-filing. For example, Ling (2018)
maintains that many studies around the world have shown taxpayer’s resistances to the use of e-
filing system, hence it is a big challenge to the authorities.

The next challenge is related to limited cost saving. According to Coolidge and Yılmaz (2014),
many in the international donor community supporting tax reforms had assumed that e-filing
would reduce tax compliance costs for taxpayers, however their survey evidence from

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investment climate work conducted by the World Bank Group shows that this is not necessarily
the case. According to Röcker (2018), many acceptance theories such as technology acceptance
Model (TAM) and Theory Reasoned Action (TRA) assumed that taxpayers could choose to
adopt certain technologies based on individual cost benefit considerations.

Dwilson (2014) says another challenge with e-filing is its inability to provide automated online
assistance to a taxpayer with a complex income structure. Therefore, for such taxpayers trying to
get help on a complicated tax question from a website help-desk may not be nearly as useful as
getting help from an in-person tax professional.

Some people would generally not be interested in e-filing because of a lack of computer
knowledge. This was confirmed by Crews (2013), with references to some of the lawyers in
Florida who did not want to use e-filing in their law firms due to lack of basic computer
knowledge. It also confirms that e-filing is not only limited to use by tax authorities but has been
adopted by the judiciary to make document management simple and quicker for lawyers (Crews,
2013).

2.4.3 The ways of improving electronic tax system to enhance tax compliance

The use of ICTs for self-assessment addresses the challenge of the integrity of employees and
promotes voluntary compliance. Training is essential because it provides clients with the skills
necessary in raising their attitude of voluntarily complying with taxation systems. In the
Tanzanian revenue authority, employees organize seminars to educate stakeholders about the
benefits of voluntary tax compliance (Lubua, 2014).

Crews (2013) said that lawyers feared using e-filing due to lack of computer knowledge and the
best way to reduce anxiety is to gain comfort with the use of e-filing systems and develop a
strong network of tech-savvy assistants or peers. This comfort level can be developed with
education and support. Furthermore, he encourages users to take online training that is provided
by the authorities. A study by Wahab (2012) alsorecommended customer education and wide
spread deployment of e-payment point of sale terminals to merchants.

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A study by Nyongesa (2014) recommended for decentralized ICT based tax collection systems
and offices in the sub-counties in adoption of differentiation strategies in revenue collection role
in Mombasa County. Among other strategies was; the remission of cash to the nearest bank and
not to the cash offices, improved tax rates, widened the tax base, devolution of tax base to county
government departments, improved controls on management of cash. However, the use of
automation of revenue collection system would widely increase the revenue collection. The
study recommends that the County Government of Mombasa needs to automate its revenue
collection, through partnering with the regional banks whereby the tax payers will be given
option of paying county fees through mobile money or branded credit cards via new revenue
collection system. The study also recommends the development of revenue management capacity
by training qualified personnel, establishing proper revenue management mechanisms), so as to
enable the County to provide quality services to the people.

As part of its tax policy, a government may choose to encourage the use of electronic methods
for many aspects of the economy. This may not only benefit the tax system, but also provide an
incentive to move to more efficient methods for private enterprises. One particular area is e-
invoicing. A standard electronic invoice format, for example, can reduce administrative costs for
all companies using it. But without government involvement, it is hard to get momentum behind
a particular format (Abdul, & Idris, 2016).

Governments may create automated prompts, which remind customers when they have filing or
payment obligations due. These reminders can serve as a way of improving taxpayer satisfaction
(helping them avoid an unintentional breach and subsequent penalties), but will also help the
authority to improve the rate of compliance (Geetha & Sekar, 2014).

Rather than bringing a system online across the entire tax system at once, pilot studies should be
done to allow for a proposed system to be tested in one particular circumstance, perhaps a
particular geo-region or certain tax and then evaluated and improved before being rolled out on a
larger scale. Specifically, the pilot study will run in parallel to the existing tax system and may
be an optional system that taxpayers can participate in (Mascagni, 2016). This minimizes the
impact of any problems in the pilot study, while still generating valuable feedback for the tax

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authority. Larger companies may be happy to volunteer to participate in such pilot schemes if it
will allow them more time to implement changes in their own processes.

2.5 Summary of literature review

From the Literature review, several researchers seem to concur that there is a relationship
between electronic tax system and tax compliance. These conclusions were however confirmed
or dispelled after empirical evidence was obtained from the research.

2.6 Literature gap

Most of the highlighted studies in the literature review did not explicitly address the effect of
electronic tax system on tax compliance. The study by Ndunda et al. (2015) revealed that level of
tax payment (compliance) affected optimal revenue collection but failed to show how use of
modern collection system such as electronic tax system would influence revenue collection
performance. Kinuthia and Akinnusi (2014) found that telecommunications infrastructure barrier
was one of barriers to effectiveness of e-commerce but fell short of showing the impact of e-
commerce on revenue collection. The study by Nyongesa (2014) found that the use of
automation of revenue collection system would widely increase the revenue collection but it was
not clear how the revenue collection would be influenced by e-payment. In fact, the study
recommends that the County Government of Mombasa needs to automate its revenue collection
without specifying the system to use.

Although the studies reviewed provided very useful information to the present study on
electronic tax system and tax compliance, very few have addressed the efficiency of revenue
collection as being influenced by; penalty payment system, clamping system, and control within
the e-payments system in Nairobi County. A scarcity of literature in the area of study exists,
particularly in Uganda. There was information gap especially in Uganda Revenue Authority in
particular thus the essence of this very study.

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CHAPTER THREE

RESEARCH METHODOLOGY

3.1 Introduction

This chapter presents how the study was conducted. It comprised of research design, study
population, sample size, sampling techniques, data collection methods, data collection
instruments, quality control, procedure of data collection, data Analysis, measurement of the
variables, ethical issues, and finally limitations to the study.

3.2 Research design

Saunders (2007) define research design as the general plan of how one will go about answering
the research question(s) and that it contains a clear objective, derived from your research
question specifying the sources which you intend to collect data, and consider the constraints that
will inevitably have access to data, time, location and money as well as discussing ethical issues.
This study adopted a descriptive survey design but cross sectional in nature so as to obtain
information on variables in different frameworks but concurrently. The researcher also used
quantitative approach.

3.3 Study Population

The study population was comprised of the owners and the workers of small and medium
enterprises operating in Nakawa Division - Kampala District in Central Uganda. According to
Uganda Small Scale Industries Association (2016) and Uganda Bureau of Statistics report of
(2017), there was a total of 1525 SMEs operating in Nakawa Division. However, 649 SMEs of
1525 were fully categorized as metal fabricators, Hair salons, Bars and Restaurants, motor
garages and carpentry workshops with the remaining 876 simply categorized as others (UBOS
2017). Thus for convenience in the data collection process, the study population was only
comprised of the 649 SMEs that were currently categorized.

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3.4 Sample size

The sample size was comprised of 242 SMEs in Nakawa Division. This wasdetermined
according to Krejcie and Morgan’s (1970) table. According to the table, a population of 649
small and medium taxpayers can be represented by a sample size of 242 respondents.

Table 3.1: Sample size

Category of the respondents Population Sample Size Sampling Technique

Metal Fabrication 86 40 Simple random sampling
Hair Salons 83 38 Simple random sampling
Bar & Restaurant 57 25 Simple random sampling
Motor Garages 42 18 Simple random sampling
Carpentry workshops 35 15 Simple random sampling
Shops 346 106 Simple random sampling
Total 649 242
Source:Krejcie & Morgan (1970).

3.5 Sampling technique

The researcher used purposive and simple random sampling techniques to select and obtain
respondents.

Purposive sampling involved identifying and selecting individuals or groups of individuals that
are knowledgeable about or experienced with a phenomenon of interest (Cresswell and Plano-
Clark, 2011). This sampling technique was used to select Chairpersons of different SMEs in
Nakawa Division who were interviewed. The researcher used this technique because the
respondents were knowledgeable and had a long experience in management matters.

Simple random sampling is a strategy that adds credibility to a sample when the potential
purposeful sample is larger than one can handle where by it uses small sample sizes, thus the
goal is credibility, not representativeness or the ability to generalize (Patton, 2001). This
sampling technique was used to select SMEs in Nakawa Division who were expected to

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participate in the research. The researcher used this sampling technique because each member in
this population had an equal chance of being included in the sample.

3.6 Data collection methods

This study used both quantitative and qualitative data collection methods. Quantitative data was
collected using a well-designed structured questionnaire that was filled by the staff of SMEs and
qualitative data was obtained from key informant interviews with the chairpersons of different
SMEs.

3.7 Data Collection Instrument

The researcher used questionnaires and interviews which were administered to the target
respondents chosen by the researcher.

3.7.1 Questionnaires

These contain a set of questions that are arranged systematically and logically to achieve specific
research objectives (Cohen, 1999). The questionnaire was used because it ensures confidentiality
of responses and its time saving. The questionnaire contained both open and closed ended
structured questions related to the study objectives and were distributed to the respondents and
then collected after so as to get genuine information. 242 staff of SMEs were selected randomly
to answer the questionnaires.

3.7.2 Interviews

The researcher carried out interviews with Chairpersons of SMEs in Nakawa Division. The
researcher used interview since it makes it easier to get the right information from respondents.
The researcher also used interview since it is highly sensitive hence giving first-hand
information.

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3.8 Validity and Reliability

3.8.1 Validity

Vogt (2007) defines validity as “the truth or accuracy of the research”. Saunders et al (2009) add
that it is the extent to which the data collection instrument measures as well as the
appropriateness of the measures coming to accurate conclusions. Validity tests were conducted
for content, criterion and construct validity to test how well the instrument was representative,
captures relationships between the variables as well as measured the concepts (Saunders et al,
2009; Vogt, 2007; and Sekaran & Bougie, 2010). This study utilized triangulation to ensure
validity of research findings prior to the administration of the research instruments. This
instrument was checked by experts including the supervisor of the researcher. Content validity
ratio was used to calculate the Content Validity Index, using the formula below as advanced by
Lawshe (1975).

CVI = Total Number of items rated by all respondents

Total Number of items in the Instrument

A content validity index of 0.7 and above qualifies the instrument for the study (Amin, 2005).

3.8.2 Reliability

Reliability is defined as the consistency of either measurement or design to give the same
conclusions if used at different times or by different scholars (Vogt, 2007). The first step in
ensuring reliability was by providing clear operational definitions of the variables under study as
well as split-half reliability using Cronbach’s alpha(Sekaran & Bougie, 2010). If R2 (Alpha)
value equaled to 0.7 and above, then the instrument was considered satisfactory (Cronbach,
1951; Sekaran & Bougie, 2010).

3.9 Procedure of Data Collection.

The researcher obtained and used a letter of introduction from the Dean of faculty of Business
and Administration of Uganda Christian University to collect data from the respondents as

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evidence that the research was purely for academic purposes. The process started with the
distribution of questionnaires with the accompanying letter to the respondents who filled in and
returned the questionnaires.

3.10 Data Analysis

The data was analyzed both quantitatively and qualitatively as seen below;

3.10.1 Quantitative data analysis

In analyzing the data, the researcher’s main aim was to establish whether the answers to the
research questions were provided. In this case, the researcher used SPSS version 20 to analyze
the data since it saves time and gives correct results of the findings and tabulation was applied
using frequencies and percentages in the Validation of the statistical findings. This also helped in
importing data from other sources, when datawas organized as a database, including Excel.

3.10.2 Qualitative data analysis

In this section, related literature reviews were used to discuss the findings and the field notes
were written down. Qualitative results were described according to people’s responses and
information obtained from the reports.

3.11 Measurement of the variables

The variables were measured by defining concepts. For instance, the questionnaire was designed
to ask for responses about electronic tax system and tax compliance. These were translated into
observable and measurable elements so as to develop index of the concepts. The researcher
categorized the data collected in an orderly form using the 5-point Likert scale that was used on
the questionnaire as indicated below where; 1= Strongly disagree, 2= Disagree, 3= Not sure, 4=
Agree, 5= Strongly agree. Socio economic attributes like age, sex, employment period/duration
of service, academic levels were measured at nominal and ordinal scales depending on the
variables.

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3.12 Ethical issues

The researcher ensured that no respondent suffered the effects of the research activities. The
researcher ensured confidentiality, the respondents’ participation was willingly, and the purpose
of the research was declared to the respondents. The researcher also secured a letter of
introduction from the University which provided appropriate identification of the researcher and
the purpose of the research. The researcher also followed the necessary protocols and adhered to
the ethical guidelines of the University regarding this research.

3.13 Limitations to the study

The results of the study could not be over generalized because the geographical scope was only

one division in Kampala District.

The study was faced with the limitation of inability to reach as many respondents as possible due
to their tight work schedules and the inability to get back all the questionnaires from the
respondents.

3.14 Conclusion

The chapter introduced and explained the methodological aspects that were followed when
carrying out the research constituting research design in which descriptive survey design but
cross sectional in nature was used, study population, sample size, sampling techniques used, the
data collection methods and instruments that were employed during the study, quality control of
the instruments, procedure of data collection, data analysis, measurement of the variables, ethical
considerations and limitations to the study. This set ground for chapter four which dealt with
presentation, analysis and interpretation of the results of the study.

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CHAPTER FOUR

PRESENTATION, INTERPRETATION AND ANALYSIS OF RESEARCH FINDINGS

4.1 Introduction

This chapter presents data presentation, interpretation and analysis of research findings. The
chapter presents characteristic of respondent’s background followed by presentation of study
objectives. This chapter also includes the findings by the researcher through use of
questionnaires, presentation of data in table forms, and computation of the response rate.

4.2 Response Rate

The study sought a sample of 242 respondents and consequently issued the same number
of questionnaires. However, 187 questionnaires of the total number issued were returned as fully
answered and complete. This represents a percentage response rate of 77.3%.

The table below shows the expected number of respondents, actual number of respondents and
questionnaires not returned.

Table 4.1: Response rate

Number of respondents Percentage rate

Expected number of respondents 242 100%

Actual number of respondents 187 77.3%

Questionnaires not returned 55 22.7%

Source: primary data 2019

From table 4.1 above, the percentage of response rate of the study was 77.3%. Much as it was
less than 100%, the researcher believes it was a good representation for the study because the
majority of the responses captured the required data for the study.

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4.3Background Characteristics of Respondents

The findings regarding respondents’ characters are revealed in the following tables; gender, age,
level of education, marital status and experience in running the enterprise.

4.3.1 Gender of the respondent

Gender was considered as a variable in this study since the researcher wanted to find the gender
of the respondents. This was coded into two i.e. male and female and the findings on this are
tabulated in table 4.2 below;

Table 4.2: Gender of respondents

Gender Frequency Percentage

Male 109 58.3
Female 78 41.7
Total 187 100.0

Source: Primary Data 2019

The above table indicates that majority of the respondents 58.3% were male and 41.7%were
female. This implies that males were more than females, meaning most SMEs in Nakawa
Division are managed by males since they were the majority.

4.3.2 Age of the respondents

Age was considered as a variable in this study since the researcher wanted to find out which age
group works in SMEs more than the other. This was coded into five i.e. between 18 and 25,
between 26 and 35, between 36 and 45, between 46 and 55, 56 and above and the findings on
this are tabulated in table 4.3 below;

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Table 4.3: Age of the respondents

Age Frequency Percentage

Between 18 and 25 32 17.1
Between 26 and 35 76 40.7
Between 36 and 45 50 26.7
Between 46 and 55 24 12.8
56 and above 5 2.7
Total 187 100.0
Source: Primary Data 2019

The above table shows that 40.7% representing majority of the respondents were between the
age of 26 and 35, 26.7% were between 36 and 45, 17.1% were between 18 and 25, 12.8% were
between 46 and 55 while only 2.7% were 56 years and above. This implies that most respondents
were between the age of 26 and 35, meaning that most SMEs in Nakawa Division are mostly
managed by this age group since they were the majority. This also shows that the respondents
were mature enough to understand the purpose of the study.

4.3.3Education level of the respondents

This was a key variable in this study since the researcher wanted to find out the respondents with
the highest level of education in Nakawa Division. This was coded into six i.e. None,
Certificate/Diploma, Bachelor, Masters, PhD, others and the findings on this are tabulated in
table 4.4 below;

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Table 4.4: Education level of the respondents

Education level Frequency Percentage

None 27 14.5
Certificate/Diploma 55 29.4
Bachelor 96 51.3
Masters 3 1.6
PhD 1 0.5
Others 5 2.7
Total 187 100.0
Source: Primary Data 2019

The above table indicates that majority of the respondents 51.3% attained Bachelors, 29.4%
attained Certificate/Diploma, 14.5% did not attain any level of education, 2.7% attained other
levels of education, and 1.6% attained Masters, while only 0.5% attained PhD. This implies that
majority of the respondents attained Bachelor’s Degree while only few attained PhD. This means
that SMEs in Nakawa Division are mostly dominated by those who attained Bachelor’s Degree
compared to those who attained other levels of Education.

4.3.4 Marital status of the respondents

Marital status was considered as a variable in this study since the researcher wanted to find out
marital status of the respondents in Nakawa Division. This was coded into four i.e. Single,
Married, Divorced, Widowed and the findings on this are tabulated in table 4.5 below;

Table 4.5: Marital status of the respondent

Marital status Frequency Percentage

Single 52 27.8
Married 117 62.6
Divorced 6 3.2
Widowed 12 6.4
Total 187 100.0
Source: Primary Data 2019

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Results from the above table show that majority of the respondents were married 62.6%,followed
by those who were single27.8% while 6.4% were widowed and only 3.2% were divorced. This
implies that most SMEs in Nakawa Division are dominated by those who are married, meaning
that married people tend to work better since they have few problems compared to those who are
single, divorced, and widowed

4.3.5Experience in running the enterprise

This was considered as a variable in this study since the researcher wanted to find out how long
the respondents had served in the enterprise. This was coded into four i.e. less than 1 year,
between 1 and 3 years, between 4 and 5 years, 6years and above and the findings on this are
tabulated in table 4.6 below;

Table 4.6: Experience in running the enterprise

Experience in running the enterprise Frequency Percentage

Less than a year 13 7.0

Between 1 and 3 years 85 45.4
Between 4 and 5 years 61 32.6
6 years and above 28 15.0
Total 187 100.0
Source: Primary Data 2019

The above table shows that majority of the respondents 45.4% have spent between 1 and 3 years
with the enterprise, followed by those who have spent between 4 and 5 years 32.6%,15% have
spent6 years and above while only 7% have spent less than a year with the enterprise. This
implies that most respondents have spent between 1 and 3 years with the enterprise meaning that
the respondents have ample experience with tax compliance, and they were able to give precise
information that was required by the researcher to complete the study.

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4.4The effect of electronic tax system on tax compliance

This was one of the key objectives of the study and the researcher wanted to find out the effect of
electronic tax system on tax compliance. In order to achieve this, the researcher asked several
questions and the respondents were requested to indicate their level of agreement and
disagreement on these effects. The responses on this are indicated in table 4.7 below;

Table 4.7: The effect of electronic tax system on tax compliance

Minimum Maximum Mean Std. Deviation

A well-designed electronic tax system can lower 1.00 5.00 2.32 .905
corruption by reducing face-to-face interactions
E-filing is easy for taxpayers which increases tax 1.00 5.00 4.45 .569
compliance
E-filing is flexible for taxpayers which increases 1.00 5.00 3.98 .695
tax compliance
E-filing is convenient for taxpayers which 1.00 5.00 3.27 1.018
increases tax compliance
With an integrated e-filing and e-payment 1.00 5.00 4.13 .775
system, taxes can be filed and paid online from
any place
E-filing systems increase the quality and quantity 1.00 5.00 3.07 1.055
of information available to tax officers
Electronic tax system allows tax officers to issue 1.00 5.00 2.68 1.219
assessments and refunds more quickly
E-filing and e-payment allow better and safer 1.00 5.00 3.79 .977
data storage
Electronic tax system helps to establish a good 1.00 5.00 2.63 1.335
system for tracking case files
Electronic Billing Machines have helped to cut
1.00 5.00 3.78 1.032
down time spent on screening books of accounts
Customers can pay their bills without moving to
the bank’s premises through electronic tax 1.00 5.00 3.93 .929
system
The implementation of e-payment is paramount
1.00 5.00 3.75 .993
in ensuring optimal revenue collection
Average 3.48 0.959
n=187

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Source: Primary Data 2019

The results on table 4.7 indicate that the average mean value is 3.48, which indicates that
respondents agreed that electronic tax system has an effect on tax compliance. The average
standard deviation is 0.959, which indicates that respondents had variation in responses
regarding the claim that electronic tax system has an effect on tax compliance.

The study found that a well-designed electronic tax system can lower corruption by reducing
face-to-face interactions. This is shown by the mean of respondents as computed by the system
as 2.32. Nevertheless, the corresponding standard deviation of 0. 905 suggests that respondents
had variation in responses regarding the claim that a well-designed electronic tax system can
lower corruption by reducing face-to-face interactions.The results in this section are in
agreement with Jayakumar & Nagalakshmi (2016) who state that a well-designed electronic
system can lower corruption by reducing face-to-face interactions. To ensure that taxes are
collected efficiently and reduce opportunities for corruption, a generally accepted principle is
that tax authorities should not handle money directly. To support the above findings, one of the
respondents interviewed had this to say;

“Electronic tax system is good and it has helped to reduce on the corruption rate
since payments are made online”

From the information revealed in table 4.7, respondents believe that e-filing is easy for taxpayers
which increase tax compliance. This is revealed by a mean value of 4.45. This implies that the
respondents strongly agreed that e-filing is easy for taxpayers which increase tax compliance.
However, a standard deviation value of 0.569 under the same test revealed varied responses from
the respondents interviewed. The standard deviation implies that a few respondents were not in
agreement with the claim that e-filing is easy for taxpayers which increases tax compliance. The
above findings are in line with Geetha & Sekar (2014) who asserted that e-filing is easy, flexible
and convenient for taxpayers.

From table 4.7, it can be revealed that e-filing is flexible for taxpayers which increases tax
compliance. This is shown by a mean value of 3.98 which implies that to a greater extent, the

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respondents agreed that e-filing is flexible for taxpayers which increases tax compliance despite
the standard deviation value of 0.695 under the same test which reveals varied responses from
the respondents. The standard deviation value shows some respondents’ dissatisfaction on the
claim of e-filing being flexible for taxpayers which increases tax compliance. The above findings
are in line with Geetha & Sekar (2014) who established that e-filing is flexible for taxpayers.

From the information collected from respondents according to table 4.7, it is clear that e-filing is
convenient for taxpayers which increases tax compliance. This is revealed by a mean value of
3.27. However, a standard deviation of 1.018 reveals varied responses from the respondents
interviewed over the same test. The standard deviation value also shows that respondents were in
disagreement with the claim. The above findings are in agreement with Geetha & Sekar (2014)
who stated that e-filing is convenient for taxpayers. E-filing makes it possible to file returns from
a taxpayer’s home, library, financial institution, work place, tax professional’s business or even
stores and shopping malls. To support the above findings, one of the respondents interviewed
asserted that;

“Electronic tax system is a very convenient method since payments can be made
from anywhere without necessarily going to URA offices or Bank”

Results from the above table 4.7 indicates that respondents strongly agreed that with an
integrated e-filing and e-payment system, taxes can be filed and paid online from any place. This
is shown by a mean of 4.13. However, a standard deviation of 0.775 is a manifestation of varied
responses from respondents as far as the test is concerned. This implies that taxes can be filed
and paid online from any place with an integrated e-filing and e-payment system which in turn
increases tax compliance.This is in line with Geetha & Sekar (2014)’s assertion that with an
integrated e-filing and e-payment system, taxes can be filed and paid online from any place.

The results in table 4.7 above reveal that respondents agreed that e-filing systems increase the
quality and quantity of information available to tax officers as shown by a mean value of 3.07.
This implies that e-filing systems increase the quality and quantity of information available to tax
officers which in turn increases the level of tax compliance by tax payers. However, a standard
deviation value of 1.055 shows variation in responses as far as e-filing systems increasing the

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quality and quantity of information available to tax officers are concerned. The above findings
are agreement with Jahirul (2016), who stated that e-filing systems increase the quality and
quantity of information available to tax officers, enabling them to complete transactions faster
and more accurately.

The results in table 4.7 above suggest that respondents agreed that electronic tax system allows
tax officers to issue assessments and refunds more quickly. This is revealed by a mean value of
2.68. This means that electronic tax system allows tax officers to issue assessments and refunds
more quickly. However, a standard deviation value of 1.219 suggests that there were varied
responses from the respondents as far as this test was concerned. The above findings are
agreement with Jahirul (2016)’s assertion that the more efficient handling provided by electronic
returns allows tax officers to issue assessments and refunds more quickly, and taxpayers know
right away if their returns have been accepted by the tax authorities.

The results in table 4.7 show a mean value of 3.79 which means that respondents agreed that e-
filing and e-payment allow better and safer data storage. However, a standard deviation of 0.977
raises concerns regarding the claim that e-filing and e-payment allow better and safer data
storage. These findings are in line with Gupta (2012) who stressed that e-filing and e-payment
allow for better, safer data storage that can be used to implement a risk management system for
auditing and enforcement.

The study found that electronic tax system helps to establish a good system for tracking case
files. This is indicated by the mean value of 2.63 which shows that the respondents agreed that
electronic tax system helps to establish a good system for tracking case files. However, a
corresponding standard deviation value of 1.335 shows variation in the responses provided by
the respondents about the claim that electronic tax system helps to establish a good system for
tracking case files. According to Gupta (2012), automation helps establish a good system for
tracking case files, which is essential for effective auditing and increases the speed and quality of
data provided to auditors. In addition, e-filing systems are usually complemented by software
that standardizes and facilitates processes for taxpayers, making compliance easier.

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The analysis results in table 4.7 reveal that Electronic Billing Machines have helped to cut down
time spent on screening books of accounts as reflected by a mean value of 3.78. However, there
is variation in the response rates of the respondents regarding the claim that Electronic Billing
Machines have helped to cut down time spent on screening books of accounts as revealed by a
standard deviation of 1.032. The above findings are in line with Jahirul (2016), who states that
Electronic Billing Machines have helped to cut down time spent on screening books of accounts.
Auditors used to spend hours investigating and going over massive documentation but with the
EBM, audits are easily conducted and by use of Electronic Billing Machines, URA is now able
to catch tax evaders with less effort.

The results as reflected in table 4.7 show a mean of 3.93. This implies that the respondents
agreed on the claim that customers can pay their bills without moving to the bank’s premises
through electronic tax system. However, a standard deviation of 0.929 raises concerns regarding
the claim that customers can pay their bills without moving to the bank’s premises through
electronic tax system. The figure of standard deviation further reveals that the respondents had
varied opinion about customers paying their bills without moving to the bank’s premises through
electronic tax system. The above results are in line with Pariwat & Hataiseere (2014), who reveal
that e-payment has been designed to help individual customers and companies as well as the
banks in eliminating or reducing some of the problems inherent in the settlement and payment
process. Customers can pay their bills without having to actually move to the bank’s premises.

The study found that respondents agreed that the implementation of e-payment is paramount in
ensuring optimal revenue collection. This is indicated by the mean value of 3.75 which shows
that they agree about the implementation of e-payment being paramount in ensuring optimal
revenue collection. However, the corresponding standard deviation also revealed a value of
0.993. This shows that there is a clear variation in the responses provided by the respondents
about the implementation of e-payment being paramount in ensuring optimal revenue collection.
The above findings are in line with Ndunda et al. (2015) who established that the implementation
of e-payment is paramount in ensuring optimal revenue collection. Various ICT based revenue
collection applications are available for use in the modern world today. These are simply referred
to as Electronic Payment (E- payment) system, integrated into revenue collection.

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4.5The challenges faced by tax payers in using electronic tax system

This was one of the key objectives of the study and the researcher wanted to find out the
challenges faced by tax payers in using electronic tax system. In order to achieve this, the
researcher asked several questions and the respondents were requested to indicate their level of
agreement and disagreement on these challenges. The responses on this are indicated in table 4.8
below;

Table 4.8: The challenges faced by tax payers in using electronic tax system

Std.
Minimum Maximum Mean Deviation
Tax payers are faced with a challenge of 1.00 5.00 3.63 .982
intermittent power supply and Internet outages
The electronic filing process still confuses a lot 1.00 5.00 2.34 1.235
of tax payers because of the many features in
web portal
Taxpayers receive demand emails from the 1.00 5.00 2.22 1.117
Integrated Tax Management System which
creates discrepancies in taxpayers’ records
The i-Tax system lacks historical records of 1.00 5.00 2.58 .921
taxpayers
There is low usage of ICTs in domestic revenue 1.00 5.00 2.48 1.165
Many taxpayers still reject the idea of using e- 1.00 5.00 2.84 .957
filing due to the risk perception associated with
it
There is lack of internet security 1.00 5.00 2.62 1.011
There is resistance to the use of e-filing by some 1.00 5.00 3.24 .961
tax payers
E-filing has inability to provide automated 1.00 5.00 3.06 .887
online assistance to a taxpayer with a complex
income structure
Some tax payers are not interested in e-filing 1.00 5.00 2.54 .979
because of a lack of computer knowledge
Average 2.76 1.022
n = 187
Source: Primary Data 2019

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The results from table 4.8 indicate that the average mean value is 2.76, which means that
respondents agreed that there are challenges faced by tax payers in using electronic tax system.
The average standard deviation value is 1.022, which means that respondents had variation on
the claim that there are challenges faced by tax payers in using electronic tax system.

From table 4.8, it can be revealed that tax payers are faced with a challenge of intermittent power
supply and Internet outages. This is shown by a mean value of 3.63, although the standard
deviation of 0.982 under the same test revealed varied responses from the respondents. This
implies that tax payers are faced with a challenge of intermittent power supply and Internet
outages which in turn affects the compliance level of the tax payers. The above findings are in
line with Akello (2014) who revealed that there are challenges such as intermittent power supply
and Internet outages but the tax body has made contingency plans to ensure that the system is
operational 24/7. To support the above findings, one of the respondents interviewed had this to
say;

“At times there is poor internet network which affects timely payment of taxes”

From the survey as reflected in table 4.8, it can be presumed that to a lesser extent respondents
agreed thatthe electronic filing process still confuses a lot of tax payers because of the many
features in web portal.This is revealed by a mean value of 2.34, although the standard deviation
of 1.235 under the same test revealed significant variations in responses generated. According to
Akello (2014), the electronic filing process still confuses a lot of people because the web portal
has many features and yet most people cannot understand some tax terms.

Study findings reveal that respondents agreed that taxpayers receive demand emails from the
Integrated Tax Management System which creates discrepancies in taxpayers’ records. This is
revealed by a mean of 2.22, although a standard deviation value of 1.117 suggested a variation in
the responses generated for the test. The standard deviation value also shows thatthe respondents
did not agree with the claim. The above findings are in line with Sheikh (2015), who established
that there have been numerous teething problems with the electronic system. Taxpayers are

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receiving demand emails from the Integrated Tax Management System. This is bound to create
discrepancies in taxpayers’ records, especially with regards to payment of tax obligations as well
as submitting returns. For instance, in the current setup, if a taxpayer pays taxes manually, the
iTax system will not recognize the payment.

Table 4.8 reveals that respondents agreed that the i-Tax system lacks historical records of
taxpayers. This is revealed by a mean value of 2.58, although the standard deviation value of
0.921 reveals varied responses from the respondents interviewed. The standard deviation
valuealso shows that some respondents disagreed on the claim that the i-Tax system lacks
historical records of taxpayers. According to Sheikh (2015), the iTax system lacks historical
records of taxpayers. Its record keeping is a “going forward” type in that it only stores tax
records of taxpayers from the time of registering for iTax onwards.

The results in table 4.8 suggest that respondents agreed that there is low usage of ICTs in
domestic revenue. This is revealed by a mean value of 2.48. However, a standard deviation value
of 1.165 suggests that there were varied responses as far as this test was concerned.The above
findings rhythm with Lubua (2014)’s assertion that in domestic revenue, there is a low usage of
ICTs.

Results from table 4.8 further revealed that majority of the respondents agreed thatmany
taxpayers still reject the idea of using e-filing due to the risk perception associated with it as
reflected by mean value of 2.84. However, a significant standard deviation of 0.957 reveals a
variation in the responses of the respondents, implying those respondents were not sure about the
claim. The above findings rhythm with Tan and Foo (2015) who state that many other taxpayers
still reject the idea of using e-filing due to the risk perception associated with it. According to
Tan and Foo (2015), this risk perception could significantly influence the taxpayer’s or users’
intention to use it.

The study found that there is lack of internet security. This is indicated by the mean value of 2.62
which shows that respondents agree that there is lack of internet security. However, the
corresponding standard deviation value of 1.011 revealed variation in the responses provided by
the respondents about the claim that there is lack of internet security. The above findings show a

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degree of agreement with Tan and Foo (2015) who emphasized that one of the first challenges of
e-filing is security of personal data and tax data.

The results in table 4.8 above reveal that respondents strongly agreed that there is resistance to
the use of e-filing by some tax payers as shown by a mean value of 3.24. This implies that there
is resistance to the use of e-filing by some tax payers. However, a standard deviation value of
0.961 shows a significant variation in responses as far as resistance to the use of e-filing by some
tax payersis concerned. The above findings are in line with Ling (2018), who stated that there is
resistance to the use of e-filing and it is a big challenge to the tax authorities.

Study findings reveal that respondents strongly agreed that E-filing has inability to provide
automated online assistance to a taxpayer with a complex income structure. This is revealed by a
mean of 3.06, although the standard deviation of 0.887 seems to suggest variation in the
responses generated for the test. This implies that E-filing has inability to provide automated
online assistance to a taxpayer with a complex income structure. This also confirms Dwilson
(2014)’s statement that the challenge with e-filing is its inability to provide automated online
assistance to a taxpayer with a complex income structure.

From the survey, as reflected in table 4.8, it can be presumed that some tax payers are not
interested in e-filing because of a lack of computer knowledge. This is revealed by a mean value
of 2.54. However, the standard deviation value of 0.979 under the same test revealed significant
variations in responses generated. The above findings are in line with Crews (2013) who argued
that some people would generally not be interested in e-filing because of a lack of computer
knowledge. For instance, some of the lawyers in Florida did not want to use e-filing in their law
firms due to lack of basic computer knowledge.

4.6The ways of improving electronic tax system to enhance tax compliance

This was one of the key objectives of the study and the researcher wanted to find out the ways of
improving electronic tax system to enhance tax compliance. In order to achieve this, the
researcher asked several questions and the respondents were requested to indicate their level of

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agreement and disagreement on these ways. The responses on this are indicated in table 4.9
below;

Table 4.2: The ways of improving electronic tax system to enhance tax compliance

Std.
Minimum Maximum Mean Deviation
The use of ICTs for self-assessment addresses the 1.00 5.00 2.74 .893
challenge of the integrity of employees and
promotes voluntary compliance
Training provides tax payers with the skills 1.00 5.00 3.00 1.005
necessary in raising their attitude of voluntarily
complying with taxation systems
Tax payers should take online training that is 1.00 5.00 2.73 1.129
provided by the tax authorities
There should be customer education and wide 1.00 5.00 3.37 .977
spread deployment of e-payment point of sale
terminals to merchants
The use of automation of revenue collection 1.00 5.00 3.48 1.033
system increases the revenue collection.
Government should encourage the use of 1.00 5.00 2.74 1.223
electronic methods for many aspects of the
economy
Governments should create automated prompts, 1.00 5.00 3.43 1.072
which remind customers when they have filing or
payment obligations due
Average 3.07 1.047

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n = 187
Source: Primary Data 2019

The findings from table 4.9 indicates that the average mean value is 3.07, which means that
respondents agreed that there are ways of improving electronic tax system to enhance tax
compliance.The average standard deviation value is 1.047, which indicates that respondents had
variation on the claim that there are ways of improving electronic tax system to enhance tax
compliance.

Results from the above table 4.9 indicates that the use of ICTs for self-assessment addresses the
challenge of the integrity of employees and promotes voluntary compliance. This is shown by a
mean of 2.74. However, a standard deviation of 0.893 is a clear manifestation of varied
responses from respondents as far as this test was concerned. This means that the use of ICTs for
self-assessment addresses the challenge of the integrity of employees and promotes voluntary
compliance. The above findings rhythm with Lubua (2014) who state that the use of ICTs for
self-assessment addresses the challenge of the integrity of employees and promotes voluntary
compliance.

The results in table 4.9 above reveal that respondents strongly agreed that training provides tax
payers with the skills necessary in raising their attitude of voluntarily complying with taxation
systems as shown by a mean value of 3.00. This implies that training provides tax payers with
the skills necessary in raising their attitude of voluntarily complying with taxation systems.
However, a standard deviation value of 1.005 shows variation in responses as far as training
providing tax payers with the skills necessary in raising their attitude of voluntarily complying
with taxation systemsis concerned. The above findings show a degree of agreement with Lubua
(2014) who argued that training is essential because it provides clients with the skills necessary
in raising their attitude of voluntarily complying with taxation systems.

The results in table 4.9 suggest that respondents agreed that tax payers should take online
training that is provided by the tax authorities. This is revealed by a mean of 2.73. This means
that tax payers should take online training that is provided by the tax authorities so as to learn the

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benefits of voluntary tax compliance. However, a standard deviation value of 1.129 suggests that
there were varied responses as far as this test was concerned. The above findings are in line with
Crews (2013) who encouraged users to take online training that is provided by the authorities.

From the information revealed in table 4.9, respondents strongly believe that there should be
customer education and wide spread deployment of e-payment point of sale terminals to
merchants. This is revealed by a mean value of 3.37, implying that there should be customer
education and wide spread deployment of e-payment point of sale terminals to merchants.
However, a standard deviation value of 0.977 under the same test revealed varied responses from
the respondents interviewed. The standard deviation value also shows that respondents were not
in agreement with the claim thatthere should be customer education and wide spread deployment
of e-payment point of sale terminals to merchants. The above findings are in line with Wahab
(2012) whorecommended customer education and wide spread deployment of e-payment point
of sale terminals to merchants.

From table 4.9, it can be revealed that the use of automation of revenue collection system
increases the revenue collection.This is shown by a mean value of 3.48, although the standard
deviation of 1.033 under the same test revealed varied responses from the respondents. The
standard deviation value further shows respondents’ dissatisfaction on the claim that the use of
automation of revenue collection system increases the revenue collection. The above findings
show a degree of agreement with Nyongesa (2014) who said that the use of automation of
revenue collection system would widely increase the revenue collection.

From the information collected from respondents according to table 4.9, it is clear that
government should encourage the use of electronic methods for many aspects of the economy.
This is revealed by a mean value of 2.74. However, a standard deviation of 1.223 reveals varied
responses from the respondents interviewed over the same test. The standard deviation value also
shows that respondents were in disagreement with the claim that government should encourage
the use of electronic methods for many aspects of the economy. This reaffirms Abdul, & Idris
(2016) who asserted that as part of its tax policy, a government may choose to encourage the use
of electronic methods for many aspects of the economy. This may not only benefit the tax

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system, but also provide an incentive to move to more efficient methods for private enterprises.
One particular area is e-invoicing.

The results in table 4.9 suggest that respondents strongly agreed that governments should create
automated prompts, which remind customers when they have filing or payment obligations due.
This is revealed by a mean of 3.43. However, a significant standard deviation of 1.072 suggests
that there were varied responses as far as this test is concerned.The above findings are in line
with Geetha & Sekar (2014), who revealed that governments may create automated prompts,
which remind customers when they have filing or payment obligations due. These reminders can
serve as a way of improving taxpayer satisfaction (helping them avoid an unintentional breach
and subsequent penalties), but will also help the authority to improve the rate of compliance.

4.7 The relationship between electronic tax system and tax compliance

This was considered in this study and the researcher wanted to find out the relationship between
electronic tax system and tax compliance. A Pearson`s correlation test was run to show the
relationship between electronic tax system and tax compliance. The level of acceptance of the
relationship is when Pr=0.005 and below. The results on this are indicated in table 4.10 below;

Table 4.3: The relationship between electronic tax system and tax compliance

Correlations
Electronic tax system Tax Compliance
Electronic tax Pearson Correlation 1 .602**
system Sig. (2-tailed) .000
N 187 187
Tax Compliance Pearson Correlation .602** 1
Sig. (2-tailed) .000
N 187 187
**. Correlation is significant at the 0.01 level (2-tailed).
Source: Primary Data 2019

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Results from the above table4.10 revealed that there is a positive relationship between electronic
tax system and tax compliance equal to 0.602and the p-value is .000 which is less than 0.01.This
means that there is a significant relationship between electronic tax system and tax compliance.
The implication here is that electronic tax systemhas a positive influence on tax compliance since
there is internet payment system, electronic billing machine and mobile payment system.

4.8 Multiple Regression Analysis

Regression analysis was conducted between independent variable (electronic tax system) and

dependent variable (tax compliance).

Table 4.11: Multiple Regression Analysis

Coefficientsa
Standardized
Unstandardized Coefficients Coefficients
Model B Std. Error Beta T Sig.
1 (Constant) 1.725 .045 .000 1.000
Internet payment .558 .058 .558 9.576 .000
system
Electronic billing .088 .055 .088 1.598 .112
machine
Mobile payment .278 .053 .278 5.208 .000
system
a. Dependent Variable: Tax Compliance
Source: Primary Data 2019

According to Table 4.11, internet payment system, electronic billing machine and mobile
payment systempredict 4.5% of tax compliance (Adjusted R Square = .045). The regression
model was significant and thus reliable for making conclusions and recommendations. The most
significant predictor of tax compliance was internet payment system (Beta= 0.558, t= 9.576, Sig.

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= .000) followed by mobile payment system (Beta= 0.278, t= 5.208, Sig. = .000) and then
electronic billing machine (Beta= 0.088, t= 1.598, Sig. = 0.112). The findings revealed that
internet payment system and mobile payment system were strong predictors of tax compliance,
whereas electronic billing machine did not register a significant effect on tax compliance.

4.9 Analysis of Variances (ANOVA)

Table 4.12: Analysis of Variances (ANOVA)

ANOVAa
Model Sum of Squares Df Mean Square F Sig.
1 Regression 117.276 4 29.319 102.096 .000b
Residual 69.724 183 .381
Total 187.000 187
a. Dependent Variable: Tax Compliance
b. Predictors: (Constant), Internet Payment System, Electronic Billing Machine, Mobile Payment
System

Source: Primary Data 2019

Table 4.12 reports the summary ANOVA and F statistic which reveals the value of F (102.096)
is significant at 0.000 confidence level. The value of F is large enough to conclude that the set of
independent variables (internet payment system, electronic billing machine and mobile payment
system) are the major factors influencing tax compliance.

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CHAPTER FIVE

SUMMARY, CONCLUSION AND RECOMMENDATIONS

5.1 Introduction

This chapter presents summariesof study findings as per the study objectives, conclusions based
on those findings and recommendations based on both the study findings and other relevant
literature considered necessary and vital to be used in future to improve the study situation.

5.2 Summary of major findings

This section shows summaryof the major findings in accordance with research objectives and
questions.

5.2.1The effect of electronic tax system on tax compliance

The study found that e-filing is easy for taxpayers which increases tax compliance as reflected by
a mean value of 4.45. It was revealed thate-filing is flexible for taxpayers which increases tax
compliance as reflected by the mean value of 3.98. Furthermore, with an integrated e-filing and
e-payment system, taxes can be filed and paid online from any place, this is revealed by a mean
value of 4.13.

5.2.2The challenges faced by tax payers in using electronic tax system

The study found that tax payers are faced with a challenge of intermittent power supply and
Internet outages and this is revealed by a mean of 3.63. It was also established that there is
resistance to the use of e-filing by some tax payers as shown by a mean value of 3.24. It was also

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found that E-filing has inability to provide automated online assistance to a taxpayer with a
complex income structure and this is shown by a mean of 3.06.

5.2.3The ways of improving electronic tax system to enhance tax compliance

The findings indicated that there should be customer education and wide spread deployment of e-
payment point of sale terminals to merchants as reflected by a mean value of 3.37. It was also
established that the use of automation of revenue collection system increases the revenue
collection as shown by a mean value of 3.48. It was also found that governments should create
automated prompts, which remind customers when they have filing or payment obligations due
and this is revealed by a mean value of 3.43.

5.3Conclusions

In conclusion, the study findings revealed a positive relationship between electronic tax system
and tax compliance. This study concludes that there is a direct relationship between internet
payment system, electronic billing machine, mobile payment system and tax compliance.

5.4Recommendations

The study recommends that URA should adopt the use internet payment system to allow tax
officers to issue assessments and refunds more quickly and lower corruption by reducing face-to-
face interactions. URA and clients should subscribe to reliable internet providers for effective
and efficient service delivery. URA should also employ skilled personnel with more experience
on network management in order to ensure the reliability of network.

The study also recommends that URA should adopt the use mobile tax payment system so that
clients can pay tax easily from anywhere by use of their mobile phone. This also helps the clients
to check tax statement easily from anywhere by use of their mobile phone.

EBM should be provided to different business enterprises across the country for easy accessible
by customers, so that quick service and convenience is maintained hence increasing tax
compliance.

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In addition, URA management should keep on upgrading their electronic tax system in order to
have an up to date system for effective service delivery. URA management should ensure that
there is country wide training to clients on usage of various e-tax applications in order to enhance
tax compliance.

5.5Areas of future research

To the future researcher, more research should be done on the following areas;

The effect of network reliability on electronic tax system

The effect of technical knowhow on electronic tax system

The effect of attitudes and culture on electronic tax system

The factors that influence tax compliance by SMEs.

The different ways of increasing tax compliance of SMEs.

5.6Chapter conclusion

The chapter started with an introduction which outlined the key areas covered, this was followed
by summary and discussion of major findings which were discussed in accordance with research
objectives and questions. The chapter also handled conclusions, recommendations and areas of
future research.

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APPENDICES
APPENDIX 1: QUESTIONNAIRE

QUESTIONNAIRE ON ELECTRONIC TAX SYSTEM AND TAX COMPLIANCE IN

UGANDA

Dear respondent,

I am Nakitende Moureen, a student of Uganda Christian University Mukono, pursuing a

Master’s Degree in Business Administration. As a requirement in partial fulfillment for the
award of the above mentioned course, I am required to carry out a field research study on
“electronic tax system and tax compliance in Uganda’’. I therefore request you to take a few
minutes of your time and answer the questions below. Your responses will be used for academic
purposes only and will be treated with utmost confidentiality. Thank you.

SECTION A: Background Characteristics (Please tick where appropriate)

1. Gender

Male Female

2. Age
18-25 26-35 36-45 46-55 56 and above

3. Highest level of education

None Certificate/Diploma Bachelor Masters
PHD Other (Specify) ……………………….

4. Marital status
Single Married Divorced Widowed

5. How long have you been in this business (Years)?

0-1 1-3 3-5 6 and above

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SECTION B: THE EFFECT OF ELECTRONIC TAX SYSTEM ON TAX COMPLIANCE

Under the following sections, please tick according to your level of agreement using a scale
of; 1= Strongly Disagree, 2= Disagree, 3= Not sure, 4= Agree, 5= Strongly agree
1 2 3 4 5

A well-designed electronic tax system can lower corruption by reducing

face-to-face interactions
E-filing is easy for taxpayers which increases tax compliance

E-filing is flexible for taxpayers which increases tax compliance

E-filing is convenient for taxpayers which increases tax compliance

With an integrated e-filing and e-payment system, taxes can be filed and
paid online from any place
E-filing systems increase the quality and quantity of information
available to tax officers

Electronic tax system allows tax officers to issue assessments and

refunds more quickly
E-filing and e-payment allow better and safer data storage

Electronic tax system helps to establish a good system for tracking case
files
Electronic Billing Machines have helped to cut down time spent on
screening books of accounts
Customers can pay their bills without moving to the bank’s premises
through electronic tax system
The implementation of e-payment is paramount in ensuring optimal
revenue collection.

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SECTION C: THE CHALLENGES FACED BY TAX PAYERS IN USING

ELECTRONIC TAX SYSTEM

Under the following sections, please tick according to your level of agreement using a scale
of; 1= Strongly Disagree, 2= Disagree, 3= Not sure, 4= Agree, 5= Strongly agree

1 2 3 4 5

Tax payers are faced with a challenge of intermittent power supply and
Internet outages
The electronic filing process still confuses a lot of tax payers because of
the many features web portal
Taxpayers receive demand emails from the Integrated Tax Management
System which creates discrepancies in taxpayers’ records
The i-Tax system lacks historical records of taxpayers

There is low usage of ICTs in domestic revenue

Many taxpayers still reject the idea of using e-filing due to the risk
perception associated with it
There is lack of internet security

There is resistance to the use of e-filing by some tax payers

E-filing has inability to provide automated online assistance to a taxpayer

with a complex income structure
Some tax payers are not interested in e-filing because of a lack of
computer knowledge

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SECTION D: THE WAYS OF IMPROVING ELECTRONIC TAX SYSTEM TO

ENHANCE TAX COMPLIANCE

Under the following sections, please tick according to your level of agreement using a scale
of; 1= Strongly Disagree, 2= Disagree, 3= Not sure, 4= Agree, 5= Strongly agree

1 2 3 4 5

The use of ICTs for self-assessment addresses the challenge of the integrity
of employees and promotes voluntary compliance
Training provides tax payers with the skills necessary in raising their attitude
of voluntarily complying with taxation systems
Tax payers should take online training that is provided by the tax authorities

There should be customer education and wide spread deployment of e-

payment point of sale terminals to merchants
The use of automation of revenue collection system increases the revenue
collection.
Government should encourage the use of electronic methods for many
aspects of the economy
Governments should create automated prompts, which remind customers
when they have filing or payment obligations due

Thank you for your time.

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APPENDIX 2: INTERVIEW GUIDE

AN INTERVIEW ON ELECTRONIC TAX SYSTEM AND TAX COMPLIANCE IN

UGANDA

Dear respondent,

I am Nakitende Moureen, a student of Uganda Christian University Mukono, pursuing a

Master’s Degree in Business Administration. As a requirement in partial fulfillment for the
award of the above mentioned course, I am required to carry out a field research study on
“electronic tax system and tax compliance in Uganda’’. I therefore request you to take a few
minutes of your time and answer the questions below. Your responses will be used for academic
purposes only and will be treated with utmost confidentiality. Thank you

1. How long have you been in this organization?

2. In those years, have you seen any form of electronic tax system in this organization?

3. If yes, which ones from the time you have been in this organization?

4. What are some of the effects of electronic tax system on tax compliance?

5. What do you think is the effect of internet payment/filing systemon tax compliance?

6. What are some of the effects of mobile payment/filing system ontax compliance?

7. In your own view, what do you think is the effect of electronic billing machine ontax
compliance?

8. What are some of the challenges faced by tax payers in using electronic tax system?

9. What do you think are some of the ways of improving electronic tax system to enhance tax
compliance?

Thank you for your time and cooperation.

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