Taxpayers’ Awareness and Tax Compliance in Local Governments, A Case of Lira District.
Irene Ayugi1*, Micheal Manyange2, Nyambane David3 and Okello Simon Peter4
1234 Department of Business Administration, Kampala International University, Uganda
1*Corresponding Author: Irene Ayugi
The study aimed to investigate the relationship between taxpayers’ awareness and tax compliance in local government, specifically in Lira district. The research objectives included establishing the relationship between understanding tax laws, knowledge of tax regulations, and knowledge of tax obligations. The study used a correlational research design, using questionnaires and interviews for data collection. The sample size was determined using purposive and simple random sampling techniques. The data was analyzed using SPSS software, and 172 respondents participated. The findings showed a positive correlation between understanding tax laws and tax compliance. In other wards, understanding tax laws contributes to tax compliance. Knowledge of tax regulations and policies also positively correlates with tax compliance. Finally, knowing tax rights and obligations positively correlates with tax compliance. The study recommends that the compliance of taxpayers in Lira district be improved through tax training, seminars, and workshops aimed at enhancing tax laws, regulations, and obligations. This would help maximize tax payers’ compliance.
Keywords: Taxpayers ‘Awareness, Tax compliance, Lira district.
Taxpayers with enough formal training and learning are anticipated to have sufficient knowledge of fiscal and tax laws given their educational background and exposure, according to . And this likely to lead to timely filing of returns, the accurate reporting of income, and the timely payment of taxes (paying taxes due on time). This study assessed the relationship between tax payer’s awareness and tax compliance in lira district. Globally, the tax compliance behavior of individuals and corporate organizations is a frontline issue in academia [2, 3]. From a fiscal policy viewpoint, public authorities desire positive tax compliance in the tax collection system because tax proceedings are one of the basic elements of public financing in developed, developing, and emerging nations . It is argued that as governments continue to collect taxes, citizens will naturally make efforts to hide their growing incomes from the government’s eyes . Local governments are under pressure to offer their residents essential services on a global scale, including waste management, adequate street lighting, storm water drainage, and primary healthcare . The Lira district collects its local revenue from the following revenue sources among others, property tax, local service tax, ground rent, trading licenses, market dues, operation permits, hotel tax, slaughter fees, and loading and offloading fees. Contracted local revenue sources include: Trading licenses and operation permits, market dues, hotel tax, slaughter fees, and loading and offloading fees. It is a lower local government unit which is autonomous; it has the mandate to collect, manage and spend its revenue under the guidance of the stipulated statutory regulations like the Public Finance Management Act 2015, Local Governments Act 1997, Finance and Accounting Regulations 2007, and other statutory instruments issued by the line ministries .
Tax compliance in developing countries is affected by several factors ranging from the effectiveness of tax mobilization, trust, the threat of sanctions, peers’ opinions and social influence, citizens’ expectations from the government, the extent of rigidity and flexibility of the tax law, and isomorphic forces such as coercive, normative, and mimetic pressures [7, 8].
, asserted that taxpayers’ awareness may be affected by elements like the knowledge, attitudes and a working knowledge of tax laws. From the perspective of information and comprehension taxpayers’ compliance with tax laws is affected by knowledge (information) tax, sources laws, together with taxpayer obligations and rights . Firstly, paying taxes is a way to promote a nation’s progress. Because they are not adversely affected by the tax collected, taxpayers desire to pay taxes. Secondly, the state suffers severe consequences on account of the delayed tax payments both the lower tax burden. Taxpayers prefer to pay taxes because they are aware that delaying payments and gradually lowering the tax burden will limit the financial resources available, which could cause delays in the nation’s development. Thirdly, tax set by law can be forced. Because paying taxes has a solid legal base and is a fundamental obligation of every citizen, tax compliance will result in the payment of taxes.
The results showed that tax laws was statistically significant which implies that it can affect Tax compliance in local government, Lira district. The finding is in agreement with [17-19] also emphasized that understanding tax law is crucial for people since it affects their willingness to comply. This therefore implies that URA can improve tax compliance in terms of tax filing and accurate tax reporting by embracing reliable tax awareness.
Based on the results obtained, the study concludes that tax laws affect tax compliance of taxpayers in Lira district local government significantly. This implies that if the tax administrators improve on sensitizing the taxpayers about tax rules and regulation and how they are implemented and the mechanisms for collecting feedback from taxpayers about their experiences with the tax system, taxpayers will comply to tax principles and regulations. Therefore, the study recommends that tax officials should innovatively develop and implement new programs or systems on tax awareness. This will help Lira district reduce on the tax evasion and avoidance. This way, complying will improve revenue generation in Lira district local government will contribute substantially to national economic development of the country.
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CITE AS: Irene Ayugi, Micheal Manyange, Nyambane David and Okello Simon Peter (2023). Taxpayers’ Awareness and Tax Compliance in Local Governments. A Case of Lira District. IDOSR JOURNAL OF HUMANITIES AND SOCIAL SCIENCES 8(2): 28-36.