Economic Policy Paper Series

What’s in it for SMEs? Rethinking small business taxation

This paper focuses on one of the most binding constraints on MSMEs with a strong potential for growth: the high perceived tax burden and associated compliance costs.

In brief

  • Stimulating small business growth and innovation is a road to economic prosperity, the creation of decent employment, and improved tax revenues
  • Alleviating the high perceived burden of taxation and business regulation is central to incentivising the establishment and growth of MSMEs
  • A heavy tax burden suppresses the growth and formalisation incentives of the same MSMEs that would significantly contribute to tax revenues if they grew, “killing the goose that lays the golden egg”
  • The focus of small business taxation should move away from short-term revenue collection and towards incentivising growth and formalisation, building a compliance culture, and improving accounting capabilities
  • The Government of Uganda can achieve this through reforms to the rates and thresholds applied to MSMEs and the way in which tax is administered
  • In this year’s programme of work, the Government of Uganda should consider thoroughly simplifying the presumptive tax structure, and reforming the business registration and licencing system
  • Future research and reform efforts should target: improving taxpayer education and outreach, pairing tax compliance with business development services, simplifying the filing process, and enhancing MSMEs’ access to tax justice

 

You can download the full paper as pdf.

Contact Person

Verena Kasirye

Verena Kasirye

Programme Officer

verena.kasirye@kas.de +256 312 262 011/2

About this series

We examine economic issues in Uganda through a policy lens: Which way for Uganda's economic development? Which obstacles does the country face? And how can political players set the course for economic growth? This series crafts policy papers to inform and inspire debates around economic progress in Uganda. The Economic Policy Paper Series is published in cooperation with Centre for Development Alternatives. 

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Editor

Centre for Development Alternatives & Konrad-Adenauer-Stiftung e. V.