Electronic payment systems and tax compliance among the registered SMEs in Uganda, a case of the selected SMEs in Wakiso district.

Abstract

The study examined electronic payment system (EPSs) and tax compliance among the registered SMEs in Uganda, a case of the selected SMEs in Wakiso district, Uganda. The study focused on three specific objectives: To examine how banking platforms affect tax compliance among the selected registered SMEs in Wakiso District; to examine how mobile money services affect tax compliance among the selected registered SMEs in Wakiso District; and to identify the challenges selected SMEs face in using EPS for tax-related transactions in Wakiso District. The cross-sectional research design employed both qualitative and quantitative data collection techniques. Neumann's algorithm was used to select a sample of 124 participants/respondents from a population of 171 SME members, tax authorities, banking agents, and mobile money agents but the study focused on 70 respondents who were interviewed and 124 questionnaires collected for analysis. Data was analysed using both descriptive and inferential statistics, including ANOVA, Pearson correlation, and model summaries for regression analysis. The multiple regression analysis indicated a positive and significant relation between electronic payment system and tax compliance among the selected SMEs in Wakiso (R=.758, P<0.005). This reveals that banking platforms and mobile money services were efficient in enhancing tax compliance in as far as improvement in the accuracy of transactions and reduction of tendencies to evade taxes is concerned. The study concluded that the integration of banking platforms, mobile money services into the operations of the selected Small and Medium Enterprises in Wakiso District is essential for enhancing tax compliance. Digital banking services, including internet banking, and electronic payment systems offer the selected SMEs better financial record-keeping, transparency, and simplified transaction tracking all crucial for precise tax reporting and timely submissions. The study recommended that SMEs should conduct regular training sessions and awareness campaigns for SMEs on how to use banking platforms effectively for tax-related transactions; SMEs should conduct targeted training for SMEs on how to use mobile money platforms for tax related transactions, including filing and payments; partner with telecom companies, tax authorities, and local business associations to offer continuous digital literacy programs; the study also recommends that SMES should implement strong data protection policies, fraud detection systems, and transparent transaction tracking to build SMEs’ confidence in EPS use.