ELECTRONIC TAX FILING SYSTEM AND TAX COMPLIANCE AT UGANDA REVENUE AUTHORITY.A CASE OF UGANDA REVENUE AUTHORITY MBARARA BRANCH
BY AHURIRA AMON BBA/45557/143/DU
A RESEARCH REPORT SUBMITTED TO THE COLLAGE OF ECONOMICS AND
MANAGEMENT IN PARTIAL FULFILLMENT OF REQUIREMENTS
FOR THE A WARD OF BACHELORS' DEGREE IN BUSINESS
ADMINISTRATION OF KAMPALA INTERNATIONAL
UNIVERSITY
JUNE, 2017 DECLARATION I declare that the work in the report was carried out in accordance with the regulations of Kampala International University and that it is original except where indicated by special reference in the text, and no part of the report there of has been submitted for the award of any degree.
Signature ..... ~~ ' ...... Date ... J/\,J :~•:::~~ ····· ... ~..... Date: ...... 1 .~. .l .9.4~+. UNIVERSITY SUPERVISOR II DEDICATION I dedicate this report to my beloved parents Mr. Twinomujuni Charles and Mrs Twinomu_juni Molly 111 ACKNOWLEDGEMENT I would like to extend my appreciation to my parents Mr. Twinomujuni Charles and mrs Twinomujuni Charles my grandparents Mr. Baheza and Mrs Bahezafor their financial and moral support during the course of my study. Before I explain my experience and work during my study, I would like to thank Mr. Masembe Muzamil, for his professional and parental guidance. Without his supervision and guidance. this piece of work would not have been a success. My lecturer Mr. Medard, Head of department Dr. Kirabo Joseph and the family of Mr. Ndamureeba Dan who have been there fo r me throught the course. The respondents who took part in this study especially the staff from Uganda Revenue Authority Mbarara Branch and other respondents from the different divisions in Mbarara Municipality, I salute them for their courage, commitment and pioneering spirit. Everyone who assisted me through this study process, in particular Mr. Dusenge Fred for the statisti cal processing, and organizing of th is report. I also extend my appreciation to my family members especially Elias, Mackline, daphine thank you very much for your moral support. My friends especially Africano, Bwema Keneth, Friday Renaldo, Turyahabwe Victor, Kukunda Liz, Bikorwa Prosper, Nankima moreen, Natukunda Justine for your support. Sincere thanks also go to friends, for the support and encouragement that they always gave, which always gave me hope in all that I did during my study, God only knows how am grateful about what was rendered to me. Finally I cannot forget to thank the Almighty God fo r the protection knowledge and understanding that He gave me, and for this far He has carried me. since my first year to this date, and I say, He deserves the Praise and worship always. IV ------LIST OF ABBREVEA TIO NS ASYCUDA Automated System for Customs Data DFID British Department for International Development DTD Domestic Taxes Department of the Uganda Revenue Authority E-commerce Electronic Commerce E-filing Electronic Filing E-Tax Electronic Tax GDP Gross Domestic Product IT Income Tax LGFC Local Government Finance Commission NSSF National Social Security Fund PAYE Pay As You Earn PCA Public and Corporate Affairs PRS Payment Registration Slip TIN Tax Identification Number CGURA Commissioner General of Uganda Revenue Authority URA Uganda Revenue Authority VAT Value Added Tax V TABLE OF CONTENTS DECLARATION ...... i APPROVAL ...... ii DEDICATION ...... iii ACKNOWLEDGEMENT ...... iv LIST OF ABBREVEATIONS ...... v TABLE OF CONTENTS ...... vi LIST OF TABLE ...... ix ABSTRACT ...... xi CHAPTER ONE ...... I 1.0 Introduction ...... I I . I Background of study ...... I 1.2 Statement of the Problem ...... -l 1.3 Purpose of the study ...... 4 1.4 Objectives of the study ...... 4 1.5 Research Questions ...... 5 1.6 Scope of the study ...... 5 1.7 Significance ...... 5 CHAPTER TWO ...... 7 LITERATURE REVIEW ...... 7 2.0 Introduction ...... 7 2.1 Electronic Tax system Definition ...... 7 2.2 Co1nponents of E-tax ...... 8 2.3 Reasons for the adoption of E-tax service system ...... 9 2.4 Success of E-tax service system ...... I I 2.5 Level of tax compliance in Uganda ...... 1-l 2.6. To establish whether electronic tax filing system has reduced tax compliance of tax payer's ...... 19 CHAPTER THREE ...... 23 METHODOLOGY ...... 23 3.0 Introduction ...... 23 3.1 Research Design ...... 23 VI 3.2 Area of Study ...... 23 3.3 Study Population ...... 23 3.4 Sample Size ...... 24 3.4.1 Sampling Method ...... 24 3.4.2 Sampling procedures ...... 24 3.5 Source of Data ...... 25 3.5.1 Priinary Data ...... 25 3.5.2 Secondary Source...... 25 3.6 Data Collection Methods ...... 25 3.6. 1 Self administered questionnaire; ...... 25 3.6.2 Interview guide ...... 26 3.6. 3 Discussion ...... 26 3.6.4 Review of Documentation ...... 26 3.7 Research Procedure ...... 26 3.8 Methods of Data Handling ...... 26 3.8.1 Data editing; ...... 26 3.8.2 Data presentation: ...... 27 3.8.3 Interpretation of the study results ...... 27 3.8.4 Data analysis ...... 27 3.9 Ethical Consideration ...... 27 3. 10 Limitations of the study ...... 27 CHAPTER FOUR ...... 29 DAT A PRESENTA TIONS, ANALYSIS AND INTERPRETATION ...... 29 4.0 Introduction ...... 29 4.1 Background Information on the Respondents ...... 29 4.1.1 Gender of the respondents ...... 29 4.1.2 Tenure in Business ...... 30 4.1 .3 Tenure of Service in the Domestic Taxes Department...... 30 4.1.4 Length E-tax has been used ...... 3 I 4.1.5 Findings on age bracket of the respondents ...... 31 4.1 .6 Findings on the qualification level of the respondents ...... 32 4.2 E-tax service systems ...... 32 4.2.1 E-tax service system components ...... 32 4.2.2 Comprehending of E-tax Service system ...... 35 V II 4.2.3. Major Weaknesses of thee-tax System ...... 38 4.2.4 How Weaknesses can be overcome ...... 38 4.3. The reasons for the adoption and the successes attained ofE-tax system by URA ...... 39 4.3.1 Achievements ofE-tax Service System ...... 39 4.3.2 Changes with the adoption of E-tax service system ...... JO 4.3.3 Improvements of the rates of Iii ing returns ...... 40 4.3.4 Improvement of the URA Services ...... 41 4.3.4 Failures established though there is the adoption of E-tax service system ...... 42 4.3.4 Disadvantages noticed with the adoption ofE-tax service system ...... 42 4.3.5 Benefits of E-tax Service system ...... J3 4.3.6 Reasons for the Adoption of E-tax service system ...... 43 4.3.7 Technology Development ...... 44 4.3.8 Tax compliance ...... JS 4.4 Level of Tax Compliance ...... JS 4.5. To establish whether electronic tax filing system has reduced tax compliance costs ofta,-. payer's ...... 49 CHAPTER FIVE ...... 53 DISCUSSION OF FINDINGS, CONCLUSION AND RECOMMENDATIONS ...... 53 5.0 Introduction ...... 53 5. l .O Discussion of Findings ...... 53 5.1.1. The components of E-tax service system ...... 53 5.1.2. The reasons for the adoption and the successes attained of E-tax system by URA ...... 53 5.1.3. Level of Tax Compliance ...... 53 5. l.4. Whether electronic tax filing system has reduced tax compliance costs of tax payer's .. 54 5.2 Conclusion ...... 55 5.3 Recommendations ...... 55 5.4 Areas for Fu1ther Research ...... 57 REFERENCE ...... 58 APPENDIX I: QUESTIONNAIRE ...... 61 viii LIST OFTABLE Table 1: Showing the users of E-tax according to gender...... 29 Table 2: Showing How Long Tax Payers Have Been In Business ...... 30 Table 3: Showing Tenure of Service in Domestic Taxes Department...... 30 Table 4. Showing the length of time E-tax services have been used ...... 3 I Table 5:Showing findings on the age bracket...... 31 Table 6: Showing findings on the qualification of the respondents ...... 32 Table 7. The table showing the responses concerning the components of E-tax service system ,-, ...... , ...... _)_ Table 8. The level at which respondents comprehend the E-tax service systems ...... 36 Table 9 : Showing findings on training and education of URA staff and taxpayers on E Tax matters ...... 36 Table I 0: Showing findings on filing returns using E tax system ...... 36 Table 11 :Showing findings on payment of tax using E tax system ...... 37 Table 12: Showing findings on if banks enhanced E tax application ...... 37 Table 13: Showing findings on power interruptions and low connectivity of internet on E tax application ...... 37 Table 14: Showing Major Weaknesses in thee-tax System ...... 38 Table 15: Showing how Problems can be overcome ...... 39 Table 16. Achievements of E-tax service system illustrated ...... 39 Table 17. The table showing the respondents views towards the adoption of E-tax system Vie" ··············································································································································.jO Table 18. The table showing the respondents views towards the rate of filing returns ...... 41 Table 19. The table showing the respondents views concerning the improvement in the URA Services rendered ...... -11 Table 20. The table showing the view of respondents concerning the failures of E-tax ser, ice systems ...... -12 Table 21. The table showing the respondents views concerning disadvantages of E-tax service system ...... -12 Table 22. The table showing the respondents views concerning benefits of E-tax sec, ice system ...... 43 Table 23. The table showing the respondents views concerning increase revenue of E-tax service system ...... 4-1 Table 24. The table showing the respondents views concerning technology development...... J.J ix Table 25. E-tax service increasing tax compliance ...... 45 Table 26: Showing Whether Tax Payers Pay their Taxes Willingly ...... 46 Table 27: Showing Tax Payers Pay their Dues at the Right Time and in the Right Amount. ... 46 Table 28: Showing whether Taxpayers Hate Paying because Tax rates are too high ...... 46 Table 29: Showing Low Compliance Culture and Level of Tax Compliance ...... 47 Table 30: Showing the effect of Large Informal Sector on Tax Compliance ...... 47 Table 31: Showing Tax Payer's Attitude towards URA and the Level of Tax Compliance ...... 48 Table 32: The Level of Tax Compliance is expected to Improve ...... 48 Table 33: Showing findings on whether E tax being internet based and considering that not all businesses have internet services in their office premises has led to an increase in the cost of tax compliance ...... 49 Table 34: Showing findings on whether the E tax being a 24-hour service had improved the ability to file returns on time ...... 49 Table 35: Showing findings on whether procedures in E Tax system required that respondents keep proper record of business transactions for easier assessment of returns ...... 50 Table 36 :Showing findings on E Tax has increased compliance due to reduced bureaucracies at URA offices ...... 50 Table 37:Showing findings on if application of E tax had enabled URA handle more taxpayers in a given period compared to previous systems ...... 51 Table 38 :Showing findings on if the E tax had led to improved transparency in administration of taxes ...... 51 Table 39: Correlation between Application of E Tax System and efficiency in Tax Administration ...... 51 X ABSTRACT The purpose of the study was to establish the influence of the electronic tax filing system on tax collection and tax compliance following several claims of lack of transparency. inadequate education on tax matters and corruption in the assessment of taxes. The study objectives involved identifying the components of E-tax service system, to identify the reasons for the adoption and the successes attained of E-tax system by URA, to establish the level of Tax Compliance among Ugandan Tax payers and to establish whether electronic tax filing system has reduced tax compliance costs of tax payer's The research was done by employing correlation and cross sectional research designs on a survey population that generally included finance officers who handle tax matters in different companies within Mbarara district. These officers were arrived at using the purposive sampling method while the simple random sampling technique was used to select the various companies where the officers work. Data was collected from existing literature and by use of questionnaires. The data was measured using The Likert Scale and analyzed using SPSS Data Analysis program. This report explains and describes the E-tax services adopted by URA and how best it can he used by the taxpayers and the URA officials. It gives the reasons for the slow adoption of E-ta:-. services, successes achieved and the reasons for the adoption of E-tax service systems. It also includes the different findings discussed and interpreted as the results were received there giving the real view of the respondents toward the area of study. This report goes ahead to give the recommendation which can be implemented by URA to better improve the compliance of the E-tax service systems and also gives conclusions after analyzing the finding which 1vere given to the researcher when carrying out the study. This report was written basing on the information and practical skills acquired in the field and the guidance provided by the supervisor Mr. Masembe Muzamil which highlighted all the requirements of this report. However it is inevitable to mention that the field attachment program was possible by the joint efforts of both my supervisor and the respondents. In conclusion study was beneficial and vital to the researcher for he got to know what happens with the E-tax services and how best they can be applied from the information provided. hope the readers of this information will also brace it. xi xii CHAPTER ONE 1.0 Introduction All the reforms in the Uganda's tax system were aimed at improving tax collections. administration, and above all tax compliance. In a bid to improve tax compliance. Uganda Revenue Authority decided to go online hence introducing the electronic tax filing system. Knowledgeable about the sorry state of our cyber infrastructure and computer literate levels. even big companies were not bothered by the electronic talk thinking it was another loud idea by an ordinary Ugandan dreamer. Electronic tax system started as a faint rumor a couple of years ago. It hardly got the attention of small business operators as everyone imagined it was meant for big companies like Shell. Total and banks. However, this came to pass. and it's no\\ close to 20 months since its inception. This has therefore prompted this study to critical!) examine and find out whether electronic tax system has improved tax collections. administration, efficiency and above all tax compliance. 1.1 Background of study Before 1991, revenue collection was carried out by the former departments of Customs and Excise, Inland Revenue and Income Tax in the Ministry of Finance. Revenue collection was low and tax administration weak. The weakness included low tax collection. delays, poor record keeping and political interference. There was also low tax compliance. tax evasion. corruption and connivance between staff and tax payers, unmotivated workforce. inerficielll and ineffective tax administration characterized by poor internal controls and inadequate accountability. Tax policy had become volatile, unpredictable and constituted a serious hindrance to trade, investment and enterprise (Mutebille. et al, 2009). Moreover. tax administration capacity had deteriorated greatly, smuggling and evasion were rampant and decision about tax issues were heavily influenced by rent seeking behavior (Mutebille. et al. 2009). Information about tax laws, rules, and regulations was not generally available or easily accessible even to policy makers and administration officials. This encouraged corruption. created serious inequities in tax outcomes and undermined revenue collection. Uganda Revenue Authority, a revenue collecting body established in 1991 to administer and give effect to the laws or the specified provisions of the laws set out in the First Schedule to this Act, and for this purpose to assess, collect and account for all revenue to which those laws apply, advise the Minister on revenue implications, tax administration and aspects of policy changes relating to all taxes referred to in the First Schedule, perform such other functions in relation to revenue as the Minister may direct, as according to Uganda Revenue Authority act 1991.The body also collects revenue on behalf of the Ministry Finance Planning and Economic Development from individuals and non-individuals in form of taxes. The body has been facing challenges for example where, Fjelstad (2005) indicated that URA had failed to meet its targets and revenue had dropped as a percentage of Gross Domestic Product (GDP) amidst accusations of increasing corruption. An evaluation commissioned by the British Department for International Development (DFID) points to the continued public perception of a high level of corruption, reflected in the widespread availability of duty free goods on local markets and arrests of senior URA office. In March 2000 President Yoweri Museveni is repo1ted to have called the URA a den of thieves. Likewise, the former Commissioner General of the URA. Annebritt Aslund, listed corruption as problem number one in the organization. The Justice Julia Sebutinde inquiry that launched investigations into corruption at the URA unearthed gross violations of tax rules, including connivance of public officials with taxpayers leading to the loss of billions of shillings to the state poor quality of basic data ( Aguti. 201 I). All these challenges are compounded by a general limited discussion among the different stakeholders (Government, Civil Society, Media and the general public) on tax issues and the contribution that taxes have on poverty eradication and sustainable development. Tanzi and Zee (200 I) argued that tax policy in developing countries is often the a1t of the possible and also rather than the pursuit of the optimal given such circumstances (Seatini. 2011 ). Uganda Revenue Authority, the body introduced E-tax service system in 2009 which refers to the electronic filing of returns, in the bid to reduce the above challenges, risks involved and establish efficient tax systems. The system, commonly called E-Tax, was initiated b) the Uganda Revenue Authority (URA) to allow the electronic mode of registrations. filings and payments related to tax to improve service delivery and boost revenue collections. At present. about 80 percent of Uganda's domestic tax collections are made electronically. Under E-Tax. the URA has registered improved transactions for the first time ever at a rate of 4.980 on line transactions. In the initial stages of E-Tax. the URA captured 99 percent of transactions on line. amounting to over SH200billion (US$83.2 million). E-tax aids the URA in processing Income Tax, Value Added Tax (VAT), Local Excise duty, PA YE, vehicle registration. other fees. licenses and many more. Nevertheless the business enterprises' (taxpayers) reasons. for the adoption of E-tax service systems, a system introduced by URA still has problems with the services. During the first five years of the National Resistance Movement government. Uganda's tax revenue per Gross Domestic Product ratio averaged 5.8%, one of the lowest levels in Sub- 2 Saharan Africa (Ghura, I 998). Data base management was lacking because records II ere poorly kept. A lot of paper was used most of which was susceptible to loss and mis-use. This posed a serious threat to tax collection. As a result, government embarked on reforms in the revenue sector. Tax reform begun in the earnest with the formation of the Uganda Revenue Authority in September 1991 by the Uganda Revenue Authority statute number 6 of 1991 as a central autonomous organization. The key objectives in setting up URA were to improve revenue collection and address the human resource constraints through improved remuneration. recruitment, staff development and training and ethical conduct. The mandate of URA was to assess and collect specified tax revenue, administer and enforce tax payer compliance and account for revenue collected (Government of Uganda, 1991 ). As a result. revenue collection rose from 62.73billion shillings in the financial year 1990/91 to 250.1 Sbillion shillings in the financial year I 995/96(Mutebille, et al. 2009).ln spite of the above registered improvement in the tax collection, the government of Uganda still hoped that more revenue could be realized if the tax base was enlarged and tax administration improved. To achieve this, the government decided to computerize revenue collection and administration in the Customs and Excise depai1ment of URA by introducing computer software cal led the automated systems for customs data (ASYCUDA) which was specifically designed for customs administration. This development greatly facilitated the clearance of goods, improved revenue and strengthened the compilation of trade statistics. However, the apparent errors with ASYCUDA which included manipulation of the system to suit operator's interests undermined the purpose for which it was intended and hence, there was need for URA to fully automate all tax departments. A 1999 Swiss government financed external evaluation found that the level of automation in URA and the national communication infrastructure were inadequate and made recommendations to address these issues (Lo11ie, 1999). Uganda Revenue Authority in 2005 embarked on a modernization drive that has culminated into an ambitious computerized system dubbed electronic tax. The objective of the new system is to reduce the cost of the tax payer complying with URA (Musoke and Mugalu. 20 I 0). The purpose of electronic tax system and the domestic tax modernization programme 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. However. since its inception 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. 3 1.2 Statement of the Problem Despite of the introduction of the Electronic tax system, Uganda Revenue Authority is facing a problem of tax payers failing to adapt to the new system of E-tax service system. Right no\\ URA trains tax payers, organizes workshops and seminars, with an aim of informing the public about the adoption E-tax services systems. Unfortunately, tax payers still have not understood why they should adopt to the E-tax service system. The long lines are evident in the URA offices despites the existence of the E-tax system and also electronic tax system was introduced into the domestic taxes department to increase revenue collection, administration, avail services to the tax payers all the time from anywhere, reduce costs of compliance and improve tax compliance. However, tax compliance levels remain low and tax collections are below the targets set by URA (Kabafunzaki, 20 I 0). For this reason, an ideal tax policy needs to be adopted in order to ensure voluntar) compliance, economic growth and proper utilization of resources. Their size and nature makes the issue of tax compliance one of particular importance especially since most SM Es have access to limited resources and inadequate expertise to comply with diverse and complicated regulation. High compliance costs can result in tax avoidance, tax fraud, and inhibit investment by way of diminishing competitiveness of the country in terms of taxation attractiveness (Ojochogwu, 20 I 2). In this regard, this study will be conducted, focusing on Medium and Small Taxpayers based in Mbarara Municipality, with an aim to assess the taxpa)ers· willingness to adopt and use the e-filing system as well as their experiences in using the system. 1.3 Purpose of the study The purpose of the study was to establish the influence of the electronic tax tiling s:,stem on tax collection and tax compliance, 1.4 Objectives of the study (i) To identify the components ofE-tax service system. (ii) To identify the reasons for the adoption and the successes attained of E-tax s1stem b) URA. (iii) To establish the level of Tax Compliance among Ugandan Tax payers. (iv) To establish whether electronic tax filing system has reduced tax compliance costs of tax payer's. 4 1.5 Research Questions (i) What are the components of E-tax service system? (ii) What are the reasons for the adoption and the successes attained of E-tax S)Stem b) URA? (iii) What is the level of Tax Compliance among Ugandan Tax payers? (iv) Has the electronic tax filing system reduced tax compliance costs of tax payer's when doing business with Uganda Revenue Authority? 1.6 Scope of the study The study was done among taxpaying companies in Mbarara Municipality, which accounts for a great portion of domestic taxes collected. Mbarara Municipality is a third-order administrative division and is located in Mbarara District, Western Region, Uganda. The estimate terrain elevation above sea level is 1445 Metres. Attitude: -0°36'3 l.14". Longitude: 30°39'26.35" and the superior administrative division is Mbarara District. Mbarara Municipality is mainly divided in three divisions which are Kamukuzi, Nyamitanga and Kakoba. It is further sub-divided into six sub-divisions including Ruharo. Nyamitanga. Nyamityobora, Kamukuzi and Kakoba. The study focused on the components of E-tax service system, to identify the reasons for the adoption and the successes attained of E-tax system by URA. to establish the level of Ta~ Compliance among Ugandan Tax payers and to establish whether electronic tax filing system has reduced tax compliance costs of tax payer's. The study considered a period of 5 years, between 20 IO to 2015. To effectively capture the E tax service system and its adoption among tax payers. The literature content include period from 190 I up-to-date because this period has been relatively stable both economically and politically and this was the period in which the E-tax service system introduced was to enhance fu1ther performance and growth in the country. 1. 7 Significance The research provided the business owners, managers and directors with the necessary information to enable them comply with the E-tax service system hence avoid any kind of penalties. 5 The study generated knowledge for tax policy makers, administrators and revenue collectors of E-tax as it provided information on usage of the E-tax service systems and its adoption. The study increase on the existing literature on E-tax in Uganda where little research has been done, hence creating more knowledge and information to the future researchers and academicians. The study brings to light details of the manual system of tax administration as well as those of the E Tax system; giving the merits and demerits of both systems. As such, taxpayers would benefit from this study because it gives details of why the revenue authority opted for modern technology to administer taxes and not the manual system hence grasp it wholeheartedly. The Uganda Revenue Authority would benefit from the study, as details of why it opted l'or modern technology to administer taxes have been brought to light for the taxpayers causing the taxpayers to cooperate more hence comply with the authorities requirements. The Government of Uganda largely may benefit from this study, as more taxpayers was dra11 n to complying with the new system of tax administration, hence more taxes would be collected at a lower cost. Students of taxation would benefit from the study by having more knowledge about the current process involved in tax administration in comparison with the manual process. 6 CHAPTER TWO LITERATURE REVIEW 2.0 Introduction This chapter critically presents the review of the existing literature related to E-tax system and efficiency in tax administration and it explain the different objectives basing on the existing literature and they include identifying the components of E-tax service system. to identify the reasons for the adoption and the successes attained of E-tax system by URA. to establish the level of Tax Compliance among Ugandan Tax payers and to establish whether electronic tax filing system has reduced tax compliance costs of tax payer"s. 2.1 Electronic Tax system Definition A publication by the URA Ce-Registration, 20 I 0) introduces E-Tax as a name given to an Integrated Tax Administration System (ITAS) that provides on line services to the taxpayer on a 24 hour basis. The Stride Magazine (URA, 2009) reveals that the system was acquired by the Domestic Taxes Department (DTD) of the URA to modernize tax service and infrastructure. with the aim of reducing tax administrative and compliance costs. which is in concurrence with Tumuhimbise (2000) who recognizes low costs of compliance as an essential principle for tax administration. E-tax Service Systems: A tax is financial charge or other levy imposed upon a taxpayer (an individual or non individuals) by a state or functional equivalent of a state, such that failure to pay is punishable by law. Professor Seligman too defines tax as a compulsory contribution from the person to government to defray the expenses incurred uncommon interest of all without reference to special benefit concurred. It includes; income tax from the income tax Act (CAP.340 Laws of Uganda). Value Added Tax (VAT). property tax. Tax can be introduced so that it emitters face the full social cost of the emissions (Nicholas. 2006). At the national or regional level Government would want to choose a policy frame work that it's suited to their specific circumstances, tax policy can all play a role (Nicholas. 2006). Therefore in an attempt to modernize operations to fulfill its revenue obligations. the Uganda Revenue Authority introduced the electronic system of taxation commonly known as E-tax to eliminate the different challenges faced by the revenue collecting body. Electronic refers to utilizing devices constructed of working, by methods or principles of electrons. E-tax refers to the electronic filing of returns, and it includes taxes imposed on goods and services traded on 7 line among others. It offers faster-faster services than transactions via mail and they are sale and secure. Electronic tax filing, ore-filing, is a system for submitting tax documents to a revenue service electronically, often without the need to submit any paper documents. Electronic tax filing systems are an e-government application that is being utilized with increasing frequency all over the world. Such systems are particularly favorable for governments because they avoid many of the mistakes taxpayers make in manual filings, and they help to prevent tax evasion b) data matching (Manly et al, 2005). The data houses developed using electronic tax filings can allow tax inspectors to analyze declarations more thoroughly, and enable policy makers to develop fairer and more effective. (Kun, et al, 2008). 2.2 Components of E-tax Computerization of the tax collection process enables easy detection of defaulters, and also helps to reduce corruption by reducing personal interaction between tax officials and taxpayers that is necessitated by inefficient manual systems (Kayaga, 2007). With that view. URA introduced E-tax and these are elements that constitute E-tax service system. The E-tax service system includes many components which enable tax payers to effectively use the system. These components are in most cases used by Business Enterprises. The major components of the E-tax service system include the following. 2.2.1 Tax Content Services. This looks at the creation, maintenance and management or E-tax. This system is used for reference of the tax matters when dealing with the business enterprises. It has the tax application to model the details of the tax setup for all company ·s tax requirements. Sub components include Basic tax configuration, tax jurisdictions. party tax profiles, and country default controls and many more. 2.2.2 Tax Content Repository. This stores data from the tax content service, which would be used for reference in other components for easy management of the system. The faster returns can be processed then faster tax payments can be put to work managing cash flow. investing excess for a return (Hopkinton, 20 I 0). 2.2.3 Tax Service Request Manager. This requires only one representative who needs to register for everyone in the firm to be able to use the services. This component manages the access to all tax data and services, this enables Integration with E-tax services. integration "ith tax service providers and eventually there would be a Standard interface for E-tax Suite 8 applications to add tax services to their business process flows, this will help tax agents and advisers deal with the department more effectively. 2.2.4 Tax Determination Services. This looks at the different tax services and how best the) can be applied. Every tax within a tax regime has its own regulations that determine when the tax is applicable, that is, when the tax needs to be charged or paid. The tax determination contains two components including Tax Determination Management and the tax rule management which manages the requirements and processes around automatic tax calculation based on transaction details and tax setup information (Stacey, 20 I 0). 2.2.5 Tax Record Repository. This contains the components used to record all the tax documentations and transactions, which makes reference easy in case the need arises (Stacey. 2010). Propetiies are conveyed free and clear of the tax and municipal claims, and charges of whatsoever kind, depending on how it is designed separately for tax issues. 2.2.6 Tax Administration Services. This looks at the operations of the outstations to provide a convenient option for persons to pay their taxes, without having to visit a tax office or pa) online. This one manages the accounting for all tax transactions. It would include: Value Added Tax (VAT), Income Tax (IT) filings and property tax many more. 2.2.7 Tax Reporting Ledger. This component manages the record Repository and the Tax Content to enable reporting where the need arises. This reduces the time that would be spent b) the revenue officials preparing the reports for the stake holders. 2.3 Reasons for the adoption ofE-tax service system. 2.3.1 Increase revenue collection levels. Over the past years there has been an extraordinai") rate of growth in social expenditure, with expenditures on programs growing from I 7 % to 34 % of the Government's budget (LGFC) (Local Government Finance Commission, 2010). Therefore due to the desire to increase revenue collections URA decided to introduce E:-tax service system. 2.3.2 Reduce the costs incur during the collection of revenue. It does not require much of the officials of URA to collect revenue or even give assessment to the taxpayers everything i, system generated. Therefore the costs that were once incurred in collecting revenue "ere reduced. 9 2.3.3 To suit with the demanding technology. The technology worldwide is developing from manual working, to computer system working. Therefore the country would not compete favorably with the other countries which are computer system driven, therefore the need for the adoption of E-tax service system. 2.3.4 To reduce the rates of corruption levels. The corruption levels and mismanagement of funds (revenue collected) had gone up. Therefore URA devised a system that can record ever) transaction that occurred in the system, such that it is easy for the stake holders like ministry of Finance Planning and Economic Development to ascertain the amount of revenue collected by URA. 2.3.5 To smoothen payment. The long lines seen at the banks where payment of taxes \\ere made, forced the URA to devise a system that can reduce the line which were time consuming to tax payers. 2.3.6 To reduce paper work. There was need for space to keep the books of all tax payers !cir reference in case there was a need and information would be misplaced due to the files changing hands. Therefore to increase the safety of the information of taxpayers and also reduce the space that would be required for the safety of taxpayers' information, E-tax was adopted. 2.3.7 To increase the levels of tax compliance. Many taxpayers could not comply with the all the requirements of URA since it would be easy for the taxpayers to do without paying taxes. This increased the need for the adoption of a system that could easily follow up the taxpayers until they comply, hence adoption of E-tax system. 2.3.8 Increase accessibility of information. It would take time for URA to communicate to all taxpayers whenever there was some communication that was sensitive. Therefore l IR/\ adopted E-tax system where information can be communicated to the tax payers and like" ise taxpayers communicating to URA. 2.3.9 Major sources of employment. With the need to sensitize the public about the ne11 developments in URA, many people after training have acquired jobs. Likewise there are man) people who cannot use the system, there for tax consultants have managed to get job. for example when filing returns for the tax payers and many more. 10 2.4 Success of E-tax service system. Business Enterprises have had different reactions when trying to adopt the new system of filing returns, but have eventually caught up because they do not have any option but to abide by the order of the day. However according to Gens (2000), tax reforms need to consider the taxpayers attitudes and perception. Asher ( 1997) says ,for tax reforms to be effective and sustained, it requires a fiscal system in general and tax system in pa11icular that considers legitimate to enable effective management and adoption. Therefore the successes achieved with the adoption of E-tax service system by URA include the following; 2.4.1 Increased revenue Uganda is believed to have the highest tax gap of about 50% because of the difference between the tax that the URA should collect from all eligible taxpayers in the country. and what the) actually collect from the few that are compliant (Nakiwala, 20 I 0). However according to Onyango (2011) the 2010/2011 financial year performance report released in November. Uganda Revenue Authority collected Ush2.8 trillion ($1.13 billion) in domestic taxes against an annual target of Ush2.9 trillion $1.17 billion. Therefore there is a reasonable increase in revenue collection with the adoption of E-tax service system. 2.4.2 Eased payment process. The adoption of E-tax by URA enabled taxpayers to reduce the time spent on the long quees when making payments. E-tax services made the payment process smooth and manageable according to the taxpayers. Mugai (2012) says that the payment has been reduced from the two days that were once used for payment to ten minutes. 2.4.3 Eased access of information. E- tax services has enabled taxpayers to access information regarding assessment and payment of the different taxes with ease using the truck of status as earlier mentioned enabling better performance of Business Enterprises. 2.4.4 Reduced costs. Costs involved in taxes have been cut down. by eliminating middlemen. This has been a success affecting URA and the tax payers. Previously taxpayers needed to employee a tax consultant to always advise them on the tax matter. but now with the E-tax system, costs have gone down as taxpayers can inquire on line for any information needed. Morden (2011) says that since the launch of E-tax last year. various clearing and forwarding agencies have been abolished, allowing the URA to gain savings. according to information from the Public and Corporate Affairs (PCA) Division of the URA. 11 2.4.5 Time saving. There has been a reduction of the amount of time to get a Tax Identification Number (TIN), which acts as a tax payer's account in E-Tax services used to access the URA ·s online services and information, compared to the long lines that were once, have to be followed to acquire an identification number. URA successfully managed to save the taxpayer's time and the time of their officials with the adoption of E-tax, hence a success. 2. 4.6 Efficiency in filing of returns .Electronic filing has proved that it is more efficient than filing manually. When you do electronic tax filing, you can right away submit your tax return to the URA. This eliminates the time it would take for the Ugandans to use Postal Service to convey their return. 2. 4.7 Errors levels have been reduced. E-tax services have lessened or even eliminated any mistake one may have made when filing their returns. Most electronic filing services will automatically verify the math and correct the numbers if you made any. Thus. when one tiles taxes online, one is minimizing the possibility of entering erroneous information. With E-ta., services URA managed to reduce the errors that were previously submitted to URA. 2. 4.8 User friendliness. It is fairly easy and quick to use, as one only needs to have computer skills to file the returns and that is all. Therefore time has been saved since a lot can be filed in the shortest time possible. URA managed to design a system that is not complicated to understand. but can be easily understood by the taxpayers. 2. 4.9 Track Your Refund .When you file your taxes electronically. you can track the status of your refund after one submitting and therefore claim where there is a claim. For example alier submitting the VAT return one can always know the amount she has as the offset. This was made possible with the introduction of E-tax service system. 2. 4.10 Security . When you submit your taxes electronically, you trust your financial data to the security of your Internet connection, or the network of the taxpayer. While most networks are secure, a hacker could intercept or retrieve ones' sensitive financial data and wreak havoc. Of course, if you mail your tax returns, a thief could steal the return, but some people feel more secure submitting their tax returns via registered mail or through a carrier that offers insurance and guaranteed delivery to URA, hence enabling a success due to the adoption of E-tax service by URA. 12 2. 4.11 Easy receipt of returns. E-filing allows a tax return to be received and processed quicker which often results in taxpayers getting their tax refunds as soon as possible. Even though, £-filing has dramatically increased unpopularity and there are still a number of individuals who have embraced it, hence reducing the workloads of the revenue collecting body. 2. 4.12 Easy communication. It has allowed the process of information quicker, where Uganda Revenue Authority through the web portal can always communicate with the Business Enterprises (tax payers) in case the need arises, hence easy flow of information. 2. 4.13 Improved Accessibility. URA has improved accessibility by establishing different branches in the different localities. This has made the taxpayers comfortable with filing on line especially when there is need to submit the hard copy to URA. Taxpayers, on the other hand, have also benefited under E-Tax services, through its efficiency (Modern, 20 I I). 2. 4.14 lncrease in the numbers of banks in case of payment. One can now easily pay in man, different banks, when making URA payments, this making the service more convenient as taxpayers do not have to go to only Stanbic Bank Limited as it was previously the case. 2. 4.15 Customs processes. Most developing countries encourage foreign direct investment to stimulate economic growth through the use of tax incentives, (Kayaga, 2007). With the Automated System for Customs Data (ASYCUDA), the web-based, which supports paper-less declaration processes through use electronic documents, and most Customs processes being automated which was introduced in 2011. URA has managed using the ASYCUDA to adapt to the changes providing an easier channel for interconnectivity with other systems, therefore all procedures to do with filing of domestic taxes and monitoring their progress are handled b) the E-Tax system (Aguti, 201 I). This implied that one can pay taxes for the imports or even expo1ts on line. 2. 4.16 Tax payers' sensitization. URA has managed to a reasonable level. to sensitize the public about the introduction and the need for adoption of the E-tax service system. Tumuhimbise (2000) and Bhatia (2006) stresses the need for taxpayers to understand matters about taxation and taxes easily. URA through publication of the literature to do with E-tax has successfully sensitized the public and the tax payers as a whole. Sensitization involves 13 educating the taxpayers as a means of shaping their attitudes. It is necessary to convince taxpayers to comply so as to enable government do its duties (Baingana, 20 I I). 2.5 Level of tax compliance in Uganda Tax compliance refers to the willingness of people to comply with tax authorities by paying their taxes (Peter & Dijke, 2007). According to Alm (20 I I), the scope of tax compliance includes, reporting income and paying all taxes in accordance with the applicable laws. regulations, and cou1t decision. Tax compliance typically means, true reporting of the tax base. correct computation of the liability (accuracy), timely filing of the return, and timely payment of the amounts due (timeliness) (Franzoni, 2011 ). Another definition of tax compliance is a person's act of filling the Income Tax Form. declaring all taxable income accurately, and disbursing all payable taxes within the stipulated period without having to wait for follow-up actions from the authority (Singh. 2003). Roth et al (1989) explain that taxpayers need to prepare all the relevant information in the Income Tax Form within the period given, and the form must report accurate tax liability in accordance with the needs of laws, regulations, and cou1t judgments. Those who fail to adhere to taxation laws intentionally or otherwise are considered as having committed an offence. Tax non compliance or evasion on the other hand, happens when taxpayers intentionally or unintentionally fail to comply with their tax obligations. Most of the analysis of noncompliance has focused on how non-compliance or evasion is deterred through detection and sanctions (Franzoni, I 999), which approach cannot satisfactorily explain non-compliance am In the early days of empirical tax compliance research, some scholars Spicer & Lundstedt. (1976); Schwartz, ( I 978) over tuned the economist thinking and stressed that non economic factors could have significant effect on tax paying behavior. In addition Macneil. ( 1980). provided a possible explanation using relational norms. In the context of this study, tax compliance is the prompt payment of all due taxes. In URA, satisfied customers are likely to regularly comply by paying taxes on time, more frequently and in the right amounts. Compliance means adherence to the rules promptly and accurately. Therefore tax compliance is known to be behavioral, tax payers who have solidarity with tax collectors tend to comply and meet their tax obligations promptly. 14 According to Sarker, (20 I 0) Tax compliance can be defined as the degree to which a taxpayer complies (or fails to comply) with the tax rules of his country. He further said that it is widel) accepted that the goal of an efficient tax administration is to foster voluntary tax compliance using all possible methods including penalties. Ssewanyana & Okidi, (2007) added that penalizing tax evaders or going after delinquent taxpayers are not in themselves the object of tax administration, although it would serve to encourage voluntary compliance if the taxpayers believe that the tax administration can effectively detect and punish non compliance. Tax compliance has been defined by the Harvard law school (2000) as paying taxes on time and timely reporting of correct tax information. Therefore, tax compliance means seeking to pay the right amount of tax (but no more) in the right place at the right time. Where right means that the economic substance of the transaction undertaken coincides with the place and form in which they are reported for tax purposes. According to Brown and Mazur (2003), tax compliance is categorized into three multi faceted components; filling, reporting and payment. Holtzman (2007) states that tax compliance is the value of the tax payer's own time and resources along with any out of pocket costs paid to the tax preparers and other advisors, invested to ensure compliance with the laws while Carroll ( 1987) asserts that tax compliance is the provision of tax information at the proper time and ensuring returns accurately report tax liability. Byaruhanga (2007) asserts that compliance is still low due to the fact that tax authorities have not sufficiently addressed the key shortfalls in the administration systems which include unregistered tax payers, inadequate clear tax literature, tax evaders and as well delinquent tax payers. Tax compliance can either be through voluntary tax compliance or involuntary tax compliance. Voluntary tax compliance involves obeying the tax laws without any state enforcement acticlns that leads to maximizing revenues because administration costs are low in both the economic and psychic sense. The government wastes little money and time in collecting the tax and tax payers suffer little alienation in parting with their money. According to the neoclassical economic view, people obey tax laws when it is in their interest to do so. Compliance results from the individual's rational choice aimed at maximizing individual outcome. Compliance builds an atmosphere of trust and corporation because a person feels that others are accounting in a reciprocal manner. According to Jackson and Million ( I 986), the major influences of tax compliance are: age, gender, income levels. 15 education, income source, occupation status, sanctions, peer influence, ethics, complexity. probability of detection, tax rates and contact with tax authorities. However, Gilligan and Grant (2005) asse1t that the perception of tax fairness is one of the most important variables that can influence tax compliance behavior. Public perception that the tax system is fair and equitable is important if that system relies for its success on significalll degree of voluntary tax compliance, which of course the contemplary reality for man, jurisdictions. Wad ha van and Gray ( 1998) state that voluntary compliance is not only promoted by the awareness of the rights and expectations but also by clear simple and user friend!) administrative systems and procedures. According to Gilligan (l 999), an analysis that takes into account the impacts of legitimacy can be helpful when examining developments in a regulatory context such as tax compliance because regulatory norms can be of local, national or international phenomena. Non compliance is believed to have corrosive effects on tax compliance. If compliant tax payers believe that everyone else is paying his or her fair share of the taxes, they are most likely to remain compliant. If the compliant tax payers feel like they are over paying. some will reach a point where they resent it and stop complying or comply at a lower level. The degree or compliance may breed more compliance and non compliance breeds non compliance. An attitude is an individual's characteristic way of responding to an object or situation (Graham, 1989).lt is based on one's experience and leads to ce1tain behavior or the expression of ce1tain opinions. Attitudes are related to values, perceptions and group belonging but can be modified by environmental changes and new information. Bird ( 1989) stresses that the willingness of the tax payers to comply with their obligations depend to a large extent upon the perception that the funds taken from them are put to some good use. Similarly the seriousness with which the government enforces the revenue laws will also have profound effect on public attitudes. The extent to which government over reaches in trying to tax income may affect overall compliance (Gordon, 1990). In more recent theoretical advances. the tax payer's behavior towards tax compliance depends entirely on his/her attitude towards risk. Tax payers can reasonably be expected to be troubled by the awareness that high income individuals and profitable corporations pay little or no tax. even if methods being used to avoid taxes are totally legal. Unless the perception that the tax system is unfair can be reversed, tax payer morale is undermined and evasion may become 16 uncontrollable. On the other hand however, if one believes that mostly negative outcome will result from the behavior, he or she will hold a negative attitude towards it and the reverse is true. Torgler (2003) regarded attitude as the individual's positive or negative behavior towards innovation adaptation. Attitude can be portrayed by perceptions for the usefulness of taxes. perceived ease of assessment, tax administration system and any other tax payer preference. Tax payer's attitudes is composed of one's attribute beliefs about the object and perceived importance of having that attribute in making the decision to comply. According to the theory. reasoned action attitude is made up of the beliefs that person accumulates over his life time. Some beliefs are formed from direct experience, some are from outside information and others are inferred or self generated. According to Azjen and Fishbein (2000) attitude is an individual's salient belief about whether the outcome of his action will be positive or negative. The beliefs are rated for the probabilit) that engaging in the behaviors will produce the believed outcomes whether positive or negative. Azjen and fishbein (2000) believe that attitude is the degree of favorableness and unfavourableness ofan individual's feeling towards a psychological object. This can result ·,nto behaviors such as voluntary registering as a tax payer, making tax assessments and fil Ii ng returns and finally paying taxes due to the tax authority. Surrey (I 967) on the other hand argues that voluntary compliance depends on national attitudes towards the tax system and tax administration and those national attitudes can be affected b) the administration and vice versa. If the administration brings about stability and honesty in its operations, the self respect thus achieved can form basis for respect and compliance from the tax payer. Uganda has a very low VAT Gross Compliance Ratio (VATGCR) of26.50 in comparison to World and Sub-Sahara Africa (SSA) averages of 65.48 and 38.45 respectively. This low rate may be due to the significant number of exemptions. From an economic efficiency perspective. a moderate VAT rate with a broad consumption base and few exemptions is always preferred to a high rate with many exemptions. Cawley & Zake, (2010) also indicate that VATGCR has remained low because administration capacity and compliance did not improve as much as expected. 17 Further, Uganda's Corporate Income Tax Revenue Productivity (CITPROD) and Personal Income Tax (PIT) productivity (PITPTOD) measures of 0.03 and 0.11, respectively, indicate that Uganda uses these taxes less efficiently in generating revenue than World averages of 0.13 and 0.14 for CITPROD and PITPROD, respectively. The low revenue yields are partl) attributable to low levels of voluntary compliance by taxpayers, World Bank, (2007). Tax compliance is a global concern because it ensures high government revenue collection. In Uganda, URA has sought to increase tax compliance by application of sanctions such as armed monitoring, audits, and closure of non compliant tax payers' businesses, penalties and suing of tax defaulters. The use of sanctions has increased collection of revenues and tax compliance ratio. Whereas there is an increase in the collection figures and compliance, tax compliance in Uganda is still below the global average of 20% and the sub Saharan average of 18% (LIRA. 2002/03-2006/07) The low level of tax compliance ratio could be a result of low intentions to pay taxes. This is because many traders believe that the tax compliance rules give them little time to arrange payment and this increases the temptation to evade, Daily Monitor July 31. (2003). It further said that the low level could also be attributed to traders' attitude towards URA. Many traders have a negative attitude towards URA. Cuccia and Carnes (2001) affirm in consistency with prior research (e.g. White. Curatola. & Samson, 1990; Christensen, Weihrich, & Newman, I 994) that, the mediating effect of explicit justifications on equity perceptions suggests that increased education that enhances the understanding and acceptance of specific sources of tax complexity and/or tax burden distributions may serve to re-frame equity assessments and lead to increased equity perceptions without actual law changes. According to Eriksen and Fall an ( 1996), better tax knowledge accounts, at least in part for the improved perception of fairness and attitudes to other's tax invasion. It is apparent that preferences for progressivity in response to concrete questions differ significantly from abstract questions. Blum and Kalven (1953); Keene ( 1983) have suggested that the complexities of progressive taxation may not be well understood by the general public. If the consequences of progressive taxation are not well Lmder- stood, then the results of surveys that rely solely on abstract questions to determine public support for progressive or !lat tax rates may be misleading. In order to better describe the preferences for fair tax rates among the public, researchers should consider using multiple methods, including more concrete 18 frames, and questions that allow a determination of the respondent's understanding of tax terminology. 2.6. To establish whether electronic tax filing system has reduced tax compliance of tax payer's. Wenzel (2004) states that the interaction between the tax authority and the tax payer creates a good relationship that impacts on the tax payer attitude. Alm et al (2006) asserts that the trust the tax payers have in the state improves the positive attitude and commitment to paying taxes. The eventual effect is reflected through voluntary compliance by willingly reporting and Iii ling tax returns and as well as paying the tax obligations as and when they fall due. In the current generation, the computer is indisputably a central symbol. No other technology. perhaps no other object of any kind is so widely implicated in the emergency of the world of the future. Hence, computers have become the source of a special and new form of human community. It is argued that in computing there is the prospect for enhancement of job content and enrichment of work (Ernest, 1982). However, in these same changes the prospect of oppression and degradation on the job has been sighted. It should be noted that computer based systems were introduced in early 1960s in America to speed up the entry of data and the processing of transactions (Ernest, 1982). The computer applications were first introduced in banking institutions. They were mainl) used by the tellers probably because they were handling big transactions. Computerization movements have evolved and have helped set the stage on which the computer industr) expanded. In all these cases, computers were preferred to the old system of manual data processing. Similarly it has been observed that computer systems are powerfol technologies that managers can effectively use to transform their organizations into a more efficient and competitive entities. Computer applications that are capable of manipulating data in many ways or automaticall) applying relatively complex decision rules are more likely to transform organizations than are applications that just print and store data for example. word processing, electronic mail and billing (Rule and Attewel, 1989). Worth noting is the rapid use of computer-based systems is largely based on the assumption that they are instruments of organizational rationality capable of providing new opportunities 19 for managers to choose courses of action based on a more careful and explicit assessment of alternatives. This is in line with Night (1999) who found out that computerization had increased clerical staff performance, improved the professional exposure and encourage further training. However, despite the positive effects of computerization on organizational performance. usc of computers has also been the source of problems that get relatively little exposure in the popular press and professional magazines. Some of the problems are pragmatic-the dilemmas of dealing with imperfect computer systems that foul up bills, lose key data or are just much harder to work with than they should be. These kinds of problems can simply seem like minor irritations; however, they foreshadow social problems of much greater significance (Dunlop and Kling, I 991 ). Technology can allow access to facilities round the clock, permitting global operations across multiple time zones. Citizen services can also be provided around the clock reflecting the change in working life style and permitting citizens to access the services at their convenience both in temporal and spatial terms. When informational tools are directly related to tax payers and include all means accessible to them to consult and interact with the administration as well. we can talk about electronic administration. Developments in this area in several countries helped to stream line the entire process of tiling tax returns and improve relations between la~ payers and tax administration. Electronic connection with tax administration has been possible in countries like Brazil, Portugal, Netherlands, Spain, United States of America and Canada (Rains et al., 1997). The first computer ever in Uganda was an unwieldy mainframe, which arrived in I 967. Independence resulted in a rise in government workers so the computer was brought in lo help with management of public servant's payroll (Im aka, 20 I 0). The mainframe was a huge, heavy metallic box-like object with neither a keyboard, mouse, nor a central processing unit. Instead. it functioned through punch cards, usually operated by women, and it required special skills to operate. It could only be used for adding and subtracting numbers. It was stationed at the Uganda Computer Services in the Ministry of finance. They were seldom used for gathering and processing vital data of strategic national importance or for decision suppo1t, an area that has a great potential and benefits to the nation (MOFPED Report. 1998). This report also notes that the early 1980s witnessed a big breakthrough in computer technology, giving birth to the personal computers. It was not until the mid 80's that the tirst desktop Apple was brought to Uganda. 20 Hardly 50 years since the mainframe's arrival, there are now hundreds of thousands of computers in the country. If the current development is not politicized, IT development in Uganda is headed for good things. In the past decade, there has been a tremendous increase in the use of information technology with new applications coming on the market: Skype technology has one making calls using a computer connected to the Internet and teleconferencing which allows meetings between people in different places with a click of the mouse. Now not only IT professionals use computers, but the everyday person. especial!) in the urbanized pai1 of the country. The noisy type-writers have been replaced by soft touch and sensor key boards, and work which used to take two days during the era of the mainframe. now takes less than an hour to complete. Productivity levels have definitely moved up with this development. Almost all the nearly 30 universities across the country offer an !CT component on their programme prospectus which means the critical mass required to service the growth is being built in tandem with the increased access. The increase in computer usage and ownership has been boosted b, the scrapping of tax on computers. A computer that used to cost about Shs 1.6m now goes for as low as Shs500, 000(Imaka, 20 I 0). The most important new technology in Uganda is the national backbone fiber cable being installed by Huawei, a Chinese company, to provide Uganda with quicker Internet access. This technology aims at easing accessibility to Internet and technological services. It will save the people from the satellite services which are slm, and expensive. E Tax, being a web-based application can be accessed at anytime and anywhere at the taxpayer's convenience. Since the taxpayer does not have to be at URA office premises to tile returns, it greatly reduces the level of bureaucracy and time wasting because of very long queues at offices and banks, which previously was synonymous with any matters to do with taxation. The Taxman (URA, 20 I 0), reports that processes which used to take two da:,s previously now can be done within 15 minutes. Because of its format and structure. procedures are clearly laid out on the web portal such that any transactions being done are performed with utmost transparency, which Salish & Clive ( 1996) believe to be necessary for effective tax administration. With the E-Tax application, basically most transactions can be done at the taxpayer's desk. a move which greatly reduces compliance costs and improves enforcement. In regard to the tax 21 structure, the E-Tax application applies mainly to domestic taxes and non-tax revenues like motor vehicle registration, licensing services but currently does not apply to customs and excise taxes. This leaves a gap and creates a loophole for loss of revenue, much as the URA has acknowledged an improvement in domestic tax collections with the introduction of E-Tax (URA, 20 I 0). Assessment process under the E-Tax is automatic, but depends on the information availed by the taxpayer. If the taxpayer gives wrong information then the system in turn gives a wrong assessment: this poses a challenge despite the fact that the law calls l,ir penalties in case a taxpayer gives misleading information, as tax officials may still go ahead and collude with the taxpayers to give wrong or misleading information. The URA frequently assesses tax returns submitted by tax payers. These assessments are typically desk reviews of self declarations and supporting documents. The tax officer ma) accept the tax payers' declaration as it is or assesses an additional tax to be paid. The government of Uganda through Uganda Revenue Authority established in 1991 has been able to further strengthen tax administration through a series of institutional reforms (Mutebile, 2001). URA administers different types of taxes under different Laws (Acts) such as Income Tax, Value added tax, Customs duties and Excise tax among many others, Hence URA is supposed to ensure taxpayers comply with the respective tax law It is necessary to mention Kaldor's statement ( I 980) that the efficiency of a tax system is not determined only by appropriate legal regulation but also by the efficiency and integrity of the tax administration. In many countries, especially in developing countries, small amounts of collected public revenue can be explained by either incapability of the tax administration in realization of its duty, or with some degree of corruption. Regardless of how carefully tax laws have been made, they could not eliminate contlict between tax administration and tax payers. Tax administration with a skilled and responsible staff is almost the most impo1iant precondition for realization of "tax potential" of the state. It is generally known that tax laws and tax policy are as good as the tax administration. Jenkins (1992) emphasizes that the tax system can never work better than its tax administration. but even the best tax administration would ce11ainly fail to turn a bad tax system into a well operating one. He also warns that many ambitious tax reforms failed because of the inefficient tax administration. Without the permanent reorganization of the tax administration and almost daily improvements in methods of its management, it is impossible to expect that tax reforms could be realized successfully (Quintana, 1986). In tax reforms there is a close correlation between successful tax policy and efficient tax administration. In other words, there is no good tax policy without efficient tax administration (Jenkins, 1994). 22 CHAPTER THREE METHODOLOGY 3.0 Introduction This chapter shows a description of research design, study population. sampling design which includes the sampling method, sampling procedure and sample size, sources of data collection. data collection methods, data processing, analysis and presentation and the problems encountered. 3.1 Research Design The researcher used a cross sectional a case study and descriptive research designs to collect qualitative and quantitative data. A cross sectional research design is where a large population is studied at one specific time (each sample was studied once) and differences between individual groups with in the population are compared. To determine the approach and strategy that was best meet the objectives and answer the questions researcher mainly used, cross section research were also used since the research is to be carried out once in which both qualitative and quantitative techniques were utilized. Exploratory research design. since little is known about the phenomenon in question, explanatory research to explain the different E-tax service systems and later predictive research to enable the researcher predict the outcomes of the study. 3.2 Area of Study. The research was carried out in Mbarara Municipality most especially in the Mbarara Town. Research was therefore carried out with the URA officials, supervisors and managers of the Uganda Revenue Authority, and the Business Enterprises' managers, directors and employees. in Mbarara Municipality 3.3 Study Population The study population included IO staff from Uganda Revenue Authority and 20 tax pa1ers (market vendors, property tax payers, boda boda eye! ists, UTODA officials and tax authorit} J. Also the Researcher went to different offices where URA services are used visit the directors. managers and employees, URA officials, commissioners when discovering the population to he used when carrying out his research. 23 3.4 Sample Size In the sample size determination (the act of choosing the number of observations to include in the sample) is important feature of any empirical study. Therefore the researcher used 40 respondents to be able to acquire information and also to determine the expense of data collection. The study involved 30 respondents; the respondents to included IO URA supervisers, officials and managers staff members from URA in the Internal Revenue Department, IT Personnel in URA 2 respondents, , Clearing agents 8 respondents and 20 ta~ payers from each division Mbarara Municipality considering time factor constraints and other factors. 3.4.1 Sampling Method Sampling method is defined as a method used in order to obtain the required sample from the study population; During the process of data collection, stratified probability sampling technique was employed by using the following formulae and determined P= FIN x n. Where; F= Number in the category N = Total population. P = Number of respondents in the category obtained from the group n = Total number of the respondents 3.4.2 Sampling procedures Sample selection was by use of probability sampling technique especially simple random sampling and purposive sampling. Simple random sampling was used because the stud) intended to select a representative without bias from the accessible population (Oso and Onen. 2005). This ensured that each member of the target population had an equal and independent chance of being included in the sample. This involved selection of people who took part in research. The following sampling procedures were used. Purposive sampling involved selecting a certain number of respondents based on the nature of the office. This method was appropriate because it enabled selection of informed persons who possessed vital data that was comprehensive enough to allow gaining a better insight into problem. In the study respondents were contacted in person, as the researcher wanted first hand information from them and the study keenly inquired respondents· views on the subject under study. This required the researcher to sample with a purpose in the researcher's mind whereby she had to seek specific pre-defined groups of people for instance users of electronic systems like tellers. information and data sources and other staff. Random sampling method involved selecting respondents from the study population by chance. In this way every respondent had an equal chance of being included in the sample. 24 This method was used to select customer respondents from Uganda Revenue Authority Mbarara Branch. This was used to avoid bias in obtaining samples. This was achieved by getting a list of employees from the managing director and then a sampling interval was established by random method to select the respondents consistently. The study used convenient sampling in the choice of respondents. That is to say. for instance. the researcher interviewed the bank manager who was present on the day when the intervie11 took place and those who were absent were automatically excluded; the same applied ta;,,. payers (market vendors, property tax payers, boda boda cyclists, UTODA officials and ta;,,. used to select them depending on willingness of employees since some refused to participate in the research. 3.5 Source of Data 3.5.1 Primary Data Primary data was collected by use of questionnaires and interview guides in the field who 11ill be assumed to give first hand information on the subject under study. 3.5.2 Secondary Source Secondary data was got from sources like; Annual reports, Journal articles, internet. magazines, newspapers and books related to the subject of the study and these were consulted at length to extract the information required to support the findings from the study respondents. The researcher visited such places and got information that was related to the study variables as presented in literatures review. 3.6 Data Collection Methods The study was incorporated the use of various methods in the process of data collection in a bid to come up with sound, concrete and credible research findings. The researcher therefore amalgamated the use of questionnaire, interviews and documentary analysis in the process of collecting primary data. 3.6.1 Self administered questionnaire; An open and close ended questionnaire were constructed and this was self administered where the researcher allowed the study respondents to fill the questionnaire in the study field. The questionnaire were divided into sections including the title. purpose of the study. explanation about the research and the researcher: a section concerning the respondent's demographics, for instance their age, level of education. period taken in the current position/ office (experience). The main section contained questions 25 and statements designed to collect data on application of the E Tax and questions relating to efficiency in administration of taxes in Uganda, including challenges faced in tax administration; questions on factors that the respondents believed are needed for efficient tax administration and statutory requirements as well were sought after in the questionnaire. 3.6.2 Interview guide; an interview guide was also drafted with a set of questions that the researcher asked respondents during an interview and this was open ended in nature. The researcher personally recorded the provided responses as per study respondents during the process of carrying out an interview. These tools were used to collect information from respondents selected from head of departments at Uganda Revenue Authority. 3.6.3 Discussion. The researcher discuss the different issues with the different people 1vho are informed about the existence of E-tax services, as it give these individuals who are knowledgeable about tax give their views. This enabled the researcher get variety of information in relation to the study. 3.6.4 Review of Documentation: The researcher got information from existing documentation about the E Tax, general tax administration including factors required for efficiency in the same; this documentation included reports, study texts and publications by the Uganda Revenue Authority and other authors. 3. 7 Research Procedure The study observed all those procedures followed in research. Using the letter of introduction obtained from the Dean Faculty of Business and Management Sciences. the researcher \\ere introduced to every respondent reached at, fully explaining the purpose of research. Alier getting their consent, he conducted the research. The researcher also built the confidence or the respondents by assuring them that their views were confidential and was used only for academic purposes. 3.8 Methods of Data Handling Data collected was handled as follows; 3.8.1 Data editing; This involved the process of examining collected data to correct errors and omissions from the results that were obtained and hence communicate the findings. The researcher then classify the data in process of arranging in groups or class on basis of common characteristics for example according to different opinions from different people. say whether 26 the agree, disagree, strongly agree. Or strongly disagree and many more. The research was tabulating the data in process of summarizing raw data and displaying the information for further analysis where necessary. 3.8.2 Data presentation: The edited data was ready for presentation. Presentation of data involved the use of tables that were generated from the questions relevant to the stud) variables. 3.8.3 Interpretation of the study results Interpretation and discussion of the results were done by the researcher explaining the strength of the study variables basing on the frequencies and percentages, charts and graphs. Statistical conclusions were further made during the interpretation of the study results. 3.8.4 Data analysis In data analysis, the researcher used both qualitative and quantitative data analysis. The researcher needs a rough process content analysis of information from the discussion in the analysis. in order to identify the main theme that emerges from the response given by the researcher. Therefore the researcher went through the following process. Identify the main theme, by carefully going through descriptive response given by the respondents to the given questions. For the researcher to simplil'i her work, by assigning percentages to the main theme, where he needed to account for the number of times a theme had occurred in an questionnaire for example, how many times the respondents say to a statement given in the questionnaire. The researcher classifies the response under the main theme, analysis of transcripts of all the questionnaires and classifies their response under different themes and finally the researcher integrated themes into a report. Where the number of respondents was small, the researcher used quantitative method of data analysis which include; manual data analysis and computerization since she is familiar with the computer skills. 3.9 Ethical Consideration Before commencing the research, an introductory letter from the University sought and the purpose of the study explained to the authorities to avoid inconveniences and misunderstandings about the purpose. The information collected was kept highly confidential. 3.10 Limitations of the study The study involved the following constraints; The Researcher was limited by financial resources such as the transport costs and stationery to carry out her research effectively. In an effort to mitigate this shortcoming. the researcher sourced for funds from a few sponsors. 27 The researcher face with a problem of limited time since part this research is carried out during that time when preparing for examination. Since there is limited research done on the E-tax application and its efficiency in tax at URA. literature and measurement scales for the variables was not easy to obtain. But the researcher endeavored to use literature from developed countries and also carried out E-tax ser,ice profiling to obtain the measures. The study was affected by non - response from some of the business enterprises· directors to be contacted most especially the small firms which are very much sensitive to taxation issues and consider the information required private. The researchers obtained a letter of introduction and try to convince the respondents that the research was for study purposes and their responses will be kept confidential. The cross-sectional research method was used may have a limit on the accuracy of the results to be portrayed in this study. Since the adoption of E-tax is not only studied at a time but experiments could provide better results, thus affecting findings had the study used longitudinal approach. 28 CHAPTER FOUR DATA PRESENTATIONS, ANALYSIS AND INTERPRETATION 4.0 Introduction. This chapter presents the findings of the study on the establish the influence of the electronic tax filing system on tax collection and tax compliance and it explain the different objectives basing on the existing literature and they include to identify the components of E-tax service system, to identify the reasons for the adoption and the successes attained of E-tax S)stem b) URA, to establish the level of Tax Compliance among Ugandan Tax payers and to establish whether electronic tax filing system has reduced tax compliance costs of tax payer's. The findings were presented with the help of tables for purposes of easier understanding. clarity and interpretation. The response to the study consisted of 30 taxpayers. This chapter therefore covers the presentation, analysis and interpretation of the findings the researcher obtained from the field based on the above research objectives. It is against this analysis that the researcher based on to make conclusions and recommendations. 4.1 Background Information on the Respondents. 4.1.1 Gender of the respondents. In order to identify the gender that is efficient with the influence of the electronic tax filing system on tax collection and tax compliance, the respondents were asked to indicate their gender when giving responses .. the results are presented in the pie chart below. Table 1: Showing the users of E-tax according to gender. Gender Frequency Percent Valid Percent Cumulative Percent I ! Valid Male 14 46.7 46.7 46.7 I Female 16 53.3 53.3 100.0 Total 30 100.0 100.0 Source Pnma,y Data May, 2016 Table I above shows that majority of the respondents were female representing (16) 53.3% of the respondents. Since the respondents were only those who were using the E-tax since S) stem. results in the table imply that there are more female users than males. This is because the females embrace the technology than the men. Laura (2007) says that more girls than boys (53.3% vs (14) 46.7%) report experience with computer programming. This implies that companies do not discriminate against gender when it comes to employment. 29 4.1.2 Tenure in Business. In order to establish how long tax payers have been paying taxes and doing business with URA, tax payers were asked to state the period spent in business. The results are presented in table below. Table 2: Showing How Long Tax Payers Have Been In Business. Tenure in business Frequency Percent Valid Percent Cumulative Percent Between 5 - IO years 21 70.0 70.0 70.0 Above 10 years 09 30.0 30.0 100.0 Total 30 100.0 100.0 Source Primary Data May, 2016 Results in Table 2 show that 70 % (21) of the respondents have been in business for a period between 5 to IO years and 30 % (9) have been in business for a period exceeding IO years. This implies that majority of the tax payers have been in business for a considerable time hence. they understand all the dynamics involved in tax payment and administration with URA. 4.1.3 Tenure of Service in the Domestic Taxes Department. In order to establish how well URA staff is acquainted with internal process operations. the) were asked to state how long they have served in the domestic taxes department and the resu Its are shown in table. Table 3: Showing Tenure of Service in Domestic Taxes Department. ·1 Freauencv Percent Valid Percent Cumulative Percent I year 12 40.0 40.0 40.0 Between 2-5 years 12 40.0 40.0 80.0 Between 6- IO years 03 10.0 10.0 90.0 Above 10 years 03 10.0 10.0 100.0 I · 1 Total 30 100.0 100.0 "-·- --· .. Source Primary Data May, 2016 Results in Table above show that 40% (12) of the respondents in URA have served in the domestic taxes department for one year and between 2 to 5 years respectively while 10% (3) have served between 6 and IO years and above IO years respectively. Majority of the staff have served between I and 5 years. This could probably be attributed to the organization polic) ol' recruiting new people every year. It can further be argued that respondents who have served beyond IO years are least presented because of the continued job switching in country. This implies a balanced share of competences as there is a fair distribution of tenure of oflice between those who have spent one year and those that have spent more than I year. Th is 30 therefore enables ease of work among the staff as there is increased interaction among the staff hence achieving the goal and aim of revenue administration through improved internal processes and operations. 4.1.4 Length E-tax has been used. In order to establish how long the respondents have been using E-tax services the respondents were to show how long, by ticking were it was appropriate for them. Results were recorded as indicated in the table. Table 4. Showing the length of time E-tax services have been used. Number ofvears Frenuency Percent Valid Percent Cumulative Percent-- I 02 07.0 07.00 07.00 Between 2 and 5 14 47.0 47.00 54.00 Between 5 and 10 08 26.0 26.00 80.00 I Above IO years 06 20.0 20.00 100.00 I I Total 30 100.0 100.00 I Source Prima,y Data May, 2016 The majority of the respondents 47%(14) have used E-tax services for a period between t\\O to five years. This could be probably because E-tax being new system and therefore has a te11 respondents who have used it for more than five years, meaning a few people are using the system. This could be because E-tax has probably been introduced and therefore many or large population has not used it. 4.1.5 Findings on age bracket of the respondents Table 5:Showing findings on the age bracket Frequencv Percent Valid Percent Cumulative Percent 20-30 7 23.3 26.9 26.9 -- 31-40 13 43.3 50.0 76.9 -- ·-- 41-above 6 20.0 23.1 100.0 Total 26 86.7 100.0 Missin" System 4 13.3 Total 30 100.0 Source Primary Data May, 2016 Table above indicates that majority of the respondents were in the age range of 31-40 years. implying that many companies employ fairly young, energetic and fresh staff to handle ta.\ matters. 31 4.1.6 Findings on the qualification level of the respondents Table 6: Showing findings on the qualification of the respondents Freauency Percent Valid Percent Cumulative Percent Diploma 5 16.7 18.5 18.5 Bachelor's Degree 17 56.7 63.0 81.5 post graduate 5 16.7 18.5 100.0 Total 27 90.0 100.0 Missing System 3 10.0 Total 30 100.0 Source Primary Data May, 2016 Table above shows that majority of the respondents were Bachelor's Degree holders. signifying that companies employ an educated class of people who can ably handle tax matters. 4.2 E-tax service systems. 4.2.1 E-tax service system components. To identify the components that are commonly used by taxpayers and URA officials, the respondents were asked to find out where there existed components of which many respondents suggest there existed some and therefore ticked yes as their response are indicated in the chart of results below. Table 7. The table showing the responses concerning the components of E-tax service system Freauency Percent Valid Percent Cumulative Percent Yes 27 90.0 90.00 90.0 -~--· No 03 10.0 10.00 100.0 Total 30 100.0 100.00 Source Primmy Data May, 2016 As indicated above in table above, many of the responses 90% (27) indicated that there are many components of E-tax service system and went ahead to suggest some and among the many components suggested included the following. Online VAT filing which they say has saved much of their time, online income tax filing, online payment, NSSF (National Social Security Fund), component of not filing current return before previous return. integration of E tax to ASYCUDA used by customs department. Individual tax returns: There is nothing new in the idea of individual taxes being not only convenient source of revenue but also useful instrument of economic and social policy ( British 32 system of taxation), individual income levy on the employees as well as on one man firms and paiinership. The behavior of yield of the individual income is especially interesting as this is only genuinely progressive tax in Uganda (Dharam, 1966). Therefore the Ugandan employers are required to file in their income for tax assessment by URA on an annual basis which can be furnished on line with the use of E-tax services on the URA web po11al. Payment registration: On the URA homepage, go to E-Services on the Left Menu, under E Services, go to you need to login to menu, then under Register a Payment, Login if you have already created an account. If you have not created an account yet, go to E-Services on the Leli Menu, under e-Services, go to You do need to login to" menu, and select Register a Payment. (URA web portal), this done mostly where registering to pay for any kind of payment. lor example payment of VAT monthly returns, PA YE (Pay As you Earn), Income tax and many more. Payment pre-registration: This occurs where one has faulted information provided b) him on the URA web portal, for example when there is an error in the figures or amount ready for payment. And therefore need for correction of information. Information needed for one to come up with a payment registration is, payment registration number and search code. Withholding tax exempt payers, Exempt tax payers include, the income of listed institutions. the income of any organization or person entitled to privileges under the diplomatic privileges act to the extent provided in the regulations and orders made under those act, the income of an) local authority, interest payable on Treasury bills or Bank of Uganda bills etc ... (Income rn~ act sec 21). Stamp certificate authentication: A certificate is a unique electronic stamp that identifies a user or server. Certificates permit users and servers to access specific Domino servers. An ID may have many certificates. Uganda Revenue Authority"s identity is the Tin number which has a password. Therefore tax payers can always identify themselves with URA using this information. Print payment registration slip: This includes information required when making an) payment. This was used especially when the payment slip was once made and may be. it "as not printed therefore one can always use this information say the payment registration number and the search code. Payment in installment: According to the income tax act for individual, a provisional return is an estimate of the tax payers income paid before the end of any financial year of income. 33 Payment of tax on provisional return can be paid in four quarterly installments for individuals. For other person (companies), the law allows payment of this tax into two semi-annual installments, the last installment being payable by the end of tax payers tax payable accounting date. Therefore payment slips which allow payment in installments can always be filled in. online and printed to enable the tax payer submit such installments to the URA. Truck of status: In this the company will use elements like search code, reference number to get the different source of information, this information is crucial every time the company. individual wants to know it's position in relation to URA. E- Amendment: This can be on the tax type registration return. for example. VAT. income ta~ return. It also includes motor vehicle registration stamp duty and drivers permit recruit application. Monthly VAT Return Form: When submitting any amendment you would come across an illustration that looks like the one below especially when it's a return being amended. Print submitted form: Use the permit form service to make physical copy of the application form submitted on the web portal. These print outs can be signed and submitted to URA in support of the electronic application. The search code and reference numbers are needed to activate and get to this page. Registration as a collecting agent: These may include. Banking institutions. insurance companies, office of the chief government, micro finance corporation and office of the registrar, general information required include; the contact person says the managing director of the company and the organization information is always important. ( URA web portal) Download of on line form: In some cases, forms especially those required for registration can be filled on line and submitted. Such kinds of forms include individual registration. TIN ltir non-individuals, pool betting GPBT-2, VAT, local excise (LDE), for additional place of business or branch. Down load manual forms: These can be down loaded from the URA web portal and can be taken to any URA branch for submission, after filling in the required information and then being signed by the authorized person. 34 E-return for non individuals. In case one wants to submit any kind of the return for example it may be final return provision return for partnership return. This link on the URA web portal can always be used after logging in, in that particular account. Search for taxpayer: This is used to search for the TIN number in case you do not have it. The tin is an identification number URA uses for every company. director. individual doing business or transacting in any item is entitled to such. The name of the business. trade name in case you searching for the tin can always be used to have it. Return history: The return history link within URA web portal is used to get any previous information once submitted for example, in case one is submitting an monthly VAT and wants to get the offset to be carried to the next month, then the return history link can always be used. Create sub account(s). This works when one wants to open up a branch account and desires to use the same tin number for even that branch. There for a sub-account can always be used to create it with the URA web portal on line. Tax agent. This is identified after logging in the URA web po1tal. which gives registration of the agent (registering as a tax agent for the first time), and also reactivation and deactivation (occurring when the agent has not been collecting tax for a long time or when the agent wants to pull out from collecting revenue). Extend return due date. In case the taxpayer desires to extend the return date probably due 10 insufficient information or work load of the work required, then the date can always be extended. It can be done on VAT monthly returns and annual income tax returns. The dates can be extended and register with URA the dates on which the tax payer would be in position to file the return. 4.2.2 Comprehending ofE-tax Service system. In order to establish whether the respondents are at ease with the E-tax service ensure that the respondents were asked whether they really find it easy to understand and also whether the) comprehend the E-tax service system which they adopted. The response and therefore result to the response were as fol lows. 35 Table 8. The level at which resoondents comorehend the E-tax service svstems. Freauencv Percent Valid Percent Cumulative Percent Yes 18 60 60.0 60.0 No 12 40 40.0 100.0 . , .. -- Total 30 100 100.0 Source Primary Data May, 2016 From table above, the results indicate that for some reason however not stated the taxpayers a percentage 18 (60%) of tax payers do understand what to do when it comes to E-tax and therefore the need for research. The respondents went ahead to give reasons as to why they are finding it easy to comprehend, and among the reason given include, easy to understand the language used on the URA web portal, many computations are done automatically. less tiresome mandatory fields are clearly shown by the asterisk. Saves time, the versions for E-tax have guide lines to guide the used. This implies that the tax payers a reasonable percentage comprehends the E-tax services. Table 9 : Showing findings on training and education of URA staff and taxpayers on E Tax matters Freauencv Percent Valid Percent Cumulative Percent strongly agree 5 16.7 17.2 17.2 agree 14 46.7 48.3 65.5 not sure 3 10.0 10.3 75.9 disagree 5 16.7 17.2 93.1 strongly disagree 2 6.7 6.9 100.0 Total 29 96.7 100.0 Missing System 1 3.3 i' Total 30 100.0 .J Source Primmy Data May, 2016 Table above shows that 46.7% ( 14) of the respondents agreed that URA staff and taxpayers are trained and educated on E tax matters. This has been because of the sensitization that URA ha, been carrying out since the introduction of the E Tax system. Table 10: Showing findings on filing returns using E tax system Freauencv Percent Valid Percent Cumulative Percent strongly agree 16 53.3 53.3 53.3 agree 10 33.3 33.3 86.7 not sure 3 10.0 10.0 96.7 disagree I 3.3 3.3 100.0 Total 30 100.0 100.0 Source Primary Data May, 2016 36 Table above shows that 53.3% (16) of the respondents strongly agreed that as registered taxpayers they filed returns using E Tax system and 33.3% (IO) agree with the statement. This was because it is mandatory to use the system in the area of research. Table 11 :Showing findings on payment of tax using E tax system Frequency Percent Valid Percent Cumulative Percent strongly agree 17 56.7 56.7 56.7 agree 12 40,0 40.0 96.7 not sure I 3,3 3.3 100.0 Total 30 100.0 100.0 Source Primmy Data May, 2016 Table above shows that 56. 7% ( 17) of the respondents strongly agreed that they used the E Tax system as registered taxpayers to pay taxes and 40%( 12) agreed. This proves that most if not all taxpayers in areas where E Tax is in use indeed pay their taxes using E Tax system. Table 12: Showing findings on if banks enhanced E tax application Frequency Percent Valid Percent Cumulative Percent strongly agree 7 23.3 23.3 23.3 agree 15 50.0 50.0 73.3 not sure 3 10.0 10.0 83.3 disagree 5 16.7 16.7 100.0 Total 30 100.0 100.0 Source: Primary Data 2016 From table above 50 % (15) of the respondents agreed with the statement that banks enhanced E Tax application for them as tax payers owing to the fact that URA is implementing the E Tax system through banks as well. Table 13: Showing findings on power interruptions and low connectivity of internet on E tax application Freauencv Percent Valid Percent Cumulative Percent strongly agree 13 43.3 43.3 43.3 agree 15 50.0 50.0 93.3 ! not sure I 3.3 3.3 96.7 strongly disagree I 3.3 3.3 100.0 Total 30 100.0 100.0 Source Prima,y Data May, 2016 From table above, it is clear that 50% ( 15) of the respondents agreed that power interruptions and low connectivity of internet speed had negatively affected the application of E Tax II hile 43.3% strongly agreed. 37 4.2.3. Major Weaknesses of thee-tax System. In order to establish the loopholes in thee-tax system, tax payers were asked to state the major weaknesses in thee-tax system. The results are indicated in table below. Table 14: Showing Major Weaknesses in thee-tax System. Freauencv Percentae:e System always slow at the filing date 5 17.9 53.6 Serve is ever busy 15 - - It's expensive 02 7.1 Not user friendly for computer illiterates 05 17.9 Fails to use Firefox/Mozilla browser while filing 01 3.6 Total 28 100.0 Source Primmy Data May, 2016 Results in Table show that majority of the respondents signaled a problem of servers as being the major weakness of the electronic tax filing system. This is depicted by majority of the respondents I 5 (53.6%) . The poor cyber infrastructure in the country can further be seen coming into play again as a major weakness in the e-tax system as 17.9% (5) observed the same. One impo1tant aspect to be observed is that towards the I 5t1, day of filing. the system is down and too slow. This implies that the system in place is not good enough to handle all the users at the same time. This greatly undermines compliance levels as tax payers become disgruntled with the system hence leading to non- compliant behaviors. This goes ahead to further show that the system is overwhelmed by the number of users. 4.2.4 How Weaknesses can be overcome. In order to establish how the weaknesses in the e-tax system could be overcome. tax payers were asked to state solutions. The results are shown in the table below. 38 Table 15: Showing how Problems can be overcome. Frenuency Percentaee Continued educating of taxpayers 13 46.4 Setting up various URA centers across the nation 2 7.1 Server should be upgraded 10 35.7 Using it as an alternative to the manual one I 3.6 Installation of a user friendly system I 3.6 Provision of e-tax clinics I 3.6 Total 30 100.0 Source: Primary Data May, 2016 Table above indicates that majority of the tax payer's advocate for continued education about the use of the e-system whereas a considerable number advocates for the upgrading of the current servers. Setting up various URA centers across the country is also suggested and a re11 also suggest installation of a user friendly system and provision of e-tax clinics around the country. In their view, Belanger, et al (2006) argue that they are several success criteria for a web site depending on the variety of goals such as selling, informing and advertising. The authors further argue that web site success is audience specific and it should take account of diverse perspectives of users and owners. Installation of user friendly systems is very vital given the state of the cyber infrastructure in the country and the literacy levels. Presenting to tax payers a system that can easily be used in fulfilling their tax obligations gains the count,") and the URA as an organization in the achievement of its goals and targets. 4.3. The reasons for the adoption and the successes attained of E-tax system by URA. 4.3.1 Achievements of E-tax Service System. To establish whether there are successes achieved with the adoption of E-tax by URA the respondents were asked to give their responses concerning the successes of E-tax service system, and the responses were given as indicated in the table below. Table 16. Achievements of E-tax service system illustrated. -· -- Response Frequency Parentages Yes 20 67 No 10 33 Total 30 100 Source: Primary Data May, 2016 39 From the table , 67% (20)said there are many achievements with the adoption of E-tax services, and among them mentioned included. Easy accessibility of services. easy collection of revenue. detection of those whose don't want to pay taxes, Easy monitoring at URA. cas) identification of tax payers and simplification of work. It is convenient, faster services since information is on the system, monitoring and compliance levels, improved, and integration of divisions within the departments. This meant that the uses of the E-tax services were conversant with the components of E-tax service system. 4.3.2 Changes with the adoption of E-tax service system. In order to determine whether the respondents were able to notice any kind of changes with the adoption of E-tax service system by URA, the respondents were requested to give their vie\\ s towards such, and results were recorded as follows. Table 17. The table showing the respondents views towards the adoption of E-tax system View Frequency Percent Valid Percent Cumulative Percent i strongly agree 20 67.0 67.0 67.0 agree 08 27.0 27.0 94.0 not sure 02 06.0 06.0 100.0 disagree 00 00.0 00.0 100.0 strongly disagree 00 00.0 00.0 100.0 Total 30 100.0 100.0 Source: Primary Data May, 2016 This implies that many of the taxpayers and the URA officials who constituted the 20 respondents agreed that changes have been noticed due to the adoption of the E-tax service system by URA. In the same 2004 financial year, approximately was 27% (08) of individual taxpayers lodged electronically through E-tax via the website, with a further 6% (2)using tax pack express. By 2004, the suite of electronic lodgment services had grown substantially. The pervasiveness and rapidity with which this phenomenon has surged, Liane and Christina. (2004) says that E-tax services have shown a dramatic change with the adoption of the E-tax service system of paying and involving in the tax issues. 4.3.3 Improvements of the rates of filing returns. To determine whether the rates at which returns are filed have improved the respondents \\ere asked to give their views towards such and it was released as given in the table below. 40 Table 18. The table showing the respondents views towards the rate of filing returns. i Frequency Percent Valid Percent Cumulative Percent I strongly agree 18 60.0 60.0 60.0 ' -·• agree 10 33.0 33.0 93.0 not sure 02 07.0 07.0 100.0 disagree 00 00.0 00.0 100.0 strongly disagree 00 00.0 00.0 100.0 Total 30 100.0 100.0 I J Source: Primary Data May, 2016 The rates of filing returns have improved tremendously at least from the results in table above. indicate that the 60% (18) of the respondents agreed with the statement. Shs 7 trillion worth of revenue resulting from I .4 million payments have so far been receipted through electronic tax payments. This revenue is a result of over 360,000 tax returns that have been received on line via the electronic tax system codenamed E-Tax which commenced in June 2009. said Lumanyika (2012). This indicated that the rates of filing returns have increased, hence the increase in revenue since when a return of filed the payment are made. 4.3.4 Improvement of the URA Services. In order to determine whether there are improvements realized with the adoption of E-tax service system, the respondents were requested to give their views and records or results as shown in the table below. Table 19. The table showing the respondents views concerning the improvement in the URA Services rendered. ! Frequency Percent Valid Percent Cumulative Percent I strongly agree 22 73.0 73.0 73.0 ... agree 08 27.0 27.0 100.0 ! not sure 00 00.0 00.0 100.0 i disagree 00 00.0 00.0 100.0 strongly disagree 00 00.0 00.0 100.0 ' Total 30 100.0 100.0 ----• Source: Primary Data May, 2016 According to the results in table 8. 73% (22) indicate that there has been an improvement with the adoption of E-tax services. This could be probably because of the speed at which one can file the returns. According to Asianzu (2012), the benefits of E-tax services are linked to its adoption and usage. The E-tax system offers benefits both to the service provider (URA) and the better delivery of government services to citizens. improved interactions with the use or technology to improve the effectiveness of tax administrations Dowe (2008). Therefore the administration improved leading to the improvement of the URA services. 41 4.3.4 Failures established though there is the adoption of E-tax service system. In order to establish the failures of the E-tax service System the respondents were asked to give there views toward failures URA has faced despite the adoption of E-tax service system. Table 20. The table showing the view of respondents concerning the failures of E-tax service systems. - FreQuencv Percent Valid Percent Cumulative Percent Yes 10 33 33.0 90.0 No 20 67 67.0 100.0 Total 30 100 100.0 - Source: Primary Data May, 2016 Table above; indicate that 67% (20) that there are a few failures that URA has experiences during the process of adapting to the E-tax service system. This could be probably because many of the respondents were informed about the existence of the new system of E-tax service system and how to use it. Therefore they could not identify any kind of failure due to the adoption of E-tax service system. However a few respondents of about 33% (I 0) could easily identify the failures. The respondents went ahead to give the failure of E-tax serve system and among the failures included unwillingness of clients to learn the system, internet failures especially in the far upcountry stations. This implies that there is a need for URA to rectify the problem with since they have been identified. 4.3.4 Disadvantages noticed with the adoption of E-tax service system. In order to determine the whether the adoption of E-tax service system has disadvantages the respondents were asked to give their views as they are shown in the respondents below in a table. Table 21. The table showing the respondents views concerning disadvantages of E-tax service svstem. Valid Percent Cumulative Percent Frequency Percent .. strongly agree 00 00.0 00.0 00.0 agree 00 00.0 00.0 00.0 I not sure 00 00.0 00.0 00.0 I disagree 20 67 67.0 67.0 strongly disagree IO 33 33.0 100.0 Total 30 100 100.0 Source: Primary Data May, 2016 42 According to the results in table above, most of the respondents were disagreeing with the statement thus indicating that they did not have any disadvantages detected with the adoption of E-tax service system. That is why the table of results indicates 67% (20) for disagreeing respondents. 4.3.5 Benefits of E-tax Service system. To determine whether the respondents have realized the benefits with the adoption of E-ta, services system the respondents gave there respondents and the Views as indicated belo11. Table 22. The table showing the respondents views concerning benefits of E-tax service system. Frequency Percentage Electronic tax filing system is fast and convenient compared to the old manual system 10 33 E-tax service system eases payment 6 20 E-tax services helps to phase out embezzlement and also curbs I fraudulent acts. 04 13 The adoption ofE-tax service system smoothened the filling of returns 04 13 It is easy and simple for one to file tax returns using electronic tax filing system 04 13 E-tax has reduced the costs of both the tax payer and URA 02 7 Total 30 100 __ I Source: Primary Data May, 2016 Table includes results to do with benefits derived from the adoption of E-tax service system b) URA, and they were ranked accordingly, 33 %( I 0) of the respondents) show that E-tax is fast compared to the manual filing, 20 % ( 6) of the respondents) show that E-tax services ease payment. 4.3.6 Reasons for the Adoption of E-tax service system. To determine the reasons for the adoption of E-tax service system by URA. the respondents were asked to give their views concerning the reasons for the adoption of E-tax sen ice systems. To establish whether prone of the reasons for the adoption of E-tax "as to increase 43 revenue collection, the respondents were asked to give their views, and results were recorded in the table as follows. Table 23. The table showing the respondents views concerning increase revenue of E-tax service system. ---- Frequency Percent Valid Percent Cumulative Percent strongly agree 10 33 33.0 33.0 agree 20 67 67.0 100.0 not sure 00 00.0 00.0 100.0 ' disagree 00 00.0 00.0 100.0 -· strongly disagree 00 00.0 00.0 100.0 Total 30 100.0 100.0 100.0 Source: Prima,y Data May, 2016 Table shows results that 33% (IO of the respondents) show that they strongly agree with the statement, 67% ( I 0) of respondents only agree with the statement the others, their views were not tampered with. The few that were given include easy supervision, monitoring trends. faster decision making and reduction of bureaucracy. From the percentage levels this implying that the respondents think that one of the reasons for the adoption of E-tax service system by URA was to increase revenue collection. This is proved with a lot of the literature which proves that there is reasonable increase in the revenue collection, (Mungai, 20 I 2). 4.3.7 Technology Development To determine the whether technology was among the reasons as to why URA adopted to E-ta., the respondents both URA officials and Business men and ladies, gave their respondents and results were tabulated in the table as follows. Table 24. The table showing the respondents views concerning technology development. Frequency Percent Valid Percent Cumulative Percent strongly agree 12 40.0 40.0 40.0 agree 18 60.0 60.0 100.0 l not sure 00 00.0 00.0 100.0 ' disagree 00 00.0 00.0 100.0 ' .: strongly disagree 00 00.0 00.0 100.0 I .. , Total 30 100.0 100.0 Source: Prinu11y Data May, 2016 Table establishes that 40% (12) of the respondents were strongly agreeing with the statement. while the remaining 18(60%) of the respondents gave their respondents as agree, yet the other views were provided by the researcher were too tempered with as they did not have anything to 44 do with them. This implied that generally technology advancement worldwide could have forced URA to go for E-tax service system. 4.3.8 Tax compliance. In order to establish that tax compliance could be one of the reasons both the URA and the tax officials and the directors of businesses were asked to give their view towards compliance in relation to the adaption ofE-tax by URA and results were recorded in the table as follows Table 25. E-tax service increasing tax compliance. ---· I Frequency Percent Valid Percent Cumulative Percent : strongly agree 04 13 13.0 13.0 -----· agree 12 40 40.0 53.0 not sure 14 47 47.0 100.0 Total 100.0 Source: Primaiy Data May, 2016 From table above, 47% (14) were not sure about the fact that E-tax services have increased compliance of tax payers to taxation. This could be probably because they did not have exact figures. However from the discussions the researcher made, it was said that tax compliance has improved. This implies that many were not sure according to the results tabulated. Therefore this may not be among the core reasons for the establishment of E-tax service limited. However the other reasons for the adoption of E-tax could not be given by the tax payers, thus implying that the major reason for the failure of URA to cause taxpayers adopt to the E-tax without any kind of problem if that the tax payers do not understand why URA adopted to the E-tax. This was proved by the findings from both the questionnaires and the discussions made between the researcher and the respondents. 4.4 Level of Tax Compliance Factor analysis results were used to examine the level of Tax Compliance in URA in Mbarara Branch Uganda. Because this technique is appropriate for extracting the various ke) components of a specific variable, the researcher used it as an appropriate technique. Respondents were asked to rank using the likert scale (strongly agree, agree, not sure, disagree and strongly disagree) each of the statements given in the questionnaires and their response was as follows. 45 Table 26: Showing Whether Tax Payers Pay their Taxes Willingly Response Frequency Percent('½,) - --· - Strongly agree 06 20.0 ",,gree 07 23.3 Not sure 01 3.3 Disagree 14 46.7 Strongly disagree 2 6.7 Total 30 100.0 Source: Primmy data May 2016 As seen in table 4 above, the highest percentage of respondents that is 46. 7%and 6. 7% disagreed and strongly disagree respectively with the view that they pay their taxes willingly. these were followed by 23.3% (07) and 20% (6) who agreed and strongly agreed that the) pa) their taxes willing and on 3.3% (I) was not sure of what to say. Basing on the highest percentage of respondent the study concludes chances of non compliance still exist since some respondent disagreed. howing Tax Payers Pay their Dues at the Right Time and in the Right Amount Table 27: s - Response Frequency Percent(%) Strongly agree 4 13.3 ",,gree 17 56.7 - \/ot sure 02 6.7 Disagree 06 20.0 I Strongly disagree I 3.3 Total 30 100.0 Source: Primary data May 2016 Table indicates that 56.7%(17) and 13.3%(4) of the respondents agreed and strongly agreed respectively that they pay their dues at the right time and in the right amount. these were followed by 20% (6) who disagree. then 6.7% (2) who were not sure and lastly 3.3%( I) who strongly disagreed. This also implies that there is still a level of non compliance among taxpayers especially with the respondents who disagreed. Table 28: Showing whether Taxpayers Hate Paying because Tax rates are too high. Response Frequency Percent(%) Strongly agree 05 17.0 I Agree 17 57.0 ------·---- Not sure 00 00.0 Disagree 08 27.0 Strongly disagree 00 00.0 rota! 40 100.0 Source: Primmy data May 2016 46 From the table above, 57%(17) and I 7%(5)of the respondents agreed and strongly agreed respectively that they hate paying taxes because tax rates are too high. 27%(8) of the respondents disagreed and they said they pay their taxes whether they are high or not. This implies that as a result of high taxes the level of tax payers' compliance is reduced. Table 29: Showing Low Compliance Culture and Level of Tax Compliance Response Frequency Percent(%) ' Strongly agree 08 27.0 Agree 16 53.0 Not sure 03 10.0 Disagree 02 6.7 Strongly disagree 01 3.3 - fotal 30 100.0 Source: Primary data May 2016 Table indicates that 53%( 16) and 27% (8) of the respondents agreed and strong), agreed respectively that low compliance culture among tax payers affects the level of tax compliance. These were followed by I 0% who were not sure, then 6.7% (2) and 3.3% ( I )who disagreed and strongly disagreed respectively with the view that low compliance culture among tax payers affects the level of tax compliance. Basing on the highest percentage of respondents (53%)( 16). the study concludes that with a low compliance culture among tax payers the level of tax compliance is reduced hence reducing on the amount of revenue collected. Table 30: Showing the effect of Large Informal Sector on Tax Compliance. --· Response Frequency Percent(%) Strongly agree 08 26.7 o,,gree 18 60.0 -- \/ot sure 00 00.0 Disagree 04 13.3 Strongly disagree 00 00.0 Total 30 100.0 Source: Prima,y data May 2016 From table above, 60% ( I 8)and 26.7% (08)of the respondents agreed and strongly agreed respectively that if a there is large informal sector the level of tax compliance is reduced and only 13.3%(04) of the respondents disagreed. Basing on the highest percentage of respondents (60%) the study asserts that however much this informal sector contributes substantially to the growth of the economy, it remains highly susceptible to tax evasion. therefore increasing on the levels of non compliance. 47 Table 31: Showing Tax Payer's Attitude towards URA and the Level of Tax Compliance Response Frequency Percent(%) Strongly agree 08 26.7 Agree 16 53.3 Not sure 02 06.7 Disagree 03 10.0 Strongly disagree 01 03.3 Total 40 100.0 Source: Prima,y data May 2016 From table above, 53.3% ( 16) and 26. 7% (08) of the respondents agreed and strongly agreed respectively that tax payer's attitude towards URA affects the level of tax compliance. these were followed by 10% (3) who disagreed. then 6.7% (2)who were not sure. In an intervie11 with the respondents they revealed that those who have a bad attitude towards URA tend not to comply and those who comply were found to be in good terms with URA. This therefore implies that there is a high level of compliance among taxpayers who have solidarity with URA. Table 32: The Level of Tax Compliance is expected to Improve. Response Frequency Percent(%) Strongly agree 12 40.0 -~~ Agree 15 50.0 '-lot sure 03 10.0 Disagree 00 0.0 Strongly disagree 00 0.0 fotal 40 100.0 - -- ' -- Source: Primary data May 2016 From table, 50% (15) and 40% (12)ofthe respondents agreed and strongly agreed respective!} that the level of tax compliance is expected improve in Uganda. and only 10% (03) or the respondents were not sure whether level of tax compliance will improve or not. Basing on the highest percentage of the respondents (50% (15) and 40% (l2)the study concludes that with an improvement in compliance levels, URA is likely to collect more domestic revenues hence increasing funds to finance the budget. 48 4.5. To establish whether electronic tax filing system has reduced tax compliance costs of tax payer's. Table 33: Showing findings on whether E tax being internet based and considering that not all businesses have internet services in their office premises has led to an increase in the cost of tax compliance Frequency Percent Valid Percent Cumulative Percent strongly agree 16 53.3 53.3 53.3 agree 12 40.0 40.0 93.3 not sure I 3.3 3.30 96.7 - ---- disagree I 3.3 3.30 100.0 Total 30 100.0 100.0 Source: Primmy data May 2016 Table above shows that 53.3% (16) of the respondents strongly agreed that E tax is internet based and considering that not all businesses have internet services in their office premises it may lead to an increase in the cost of tax compliance. and 40% ( 12) simply agree. The statement therefore holds true. Table 34: Showing findings on whether the E tax being a 24-hour service had improved the ability to file returns on time Frequency Percent Valid Percent Cumulative Percent strongly agree 13 43.3 43.3 43.3 agree 15 50.0 50.0 93.3 disagree 01 3.30 3.30 96.7 strongly disagree 01 3.30 3.30 100.0 Total 30 100.0 100.0 Source: Primary data May 2016 Table above shows that 50.0%( 15) of the respondents agreed that the E Tax being a 24-hour service had improved their ability to file returns on time and 43.3% ( 13) strongly agreed. This finding is true because indeed E tax is a 24-hour service and thus the services can be accessed anytime and anywhere. 49 Table 35: Showing findings on whether procedures in E Tax system required that respondents keep proper record of business transactions for easier assessment of returns Frequency Percent Valid Percent Cumulative Percent strongly agree 13 43.3 43.3 43.3 Agree 16 53.3 53.3 96.7 strongly disagree 01 3.3 3.3 100.0 Total 30 100.0 100.0 Source: Primaiy data May 2016 Table above indicates that 53.3% (16) of the respondents agreed that procedures in E ta~ system require that they keep proper record of business transactions for easier assessment of returns, 43.3% (13) agree. However, this finding contradicts with finding on table. but the requirement may help companies undertake proper record keeping procedures to ease their work more so where tax assessment is concerned. Table 36 :Showing findings on E Tax has increased compliance due to reduced bureaucracies at URA offices --- Frequency Percent Valid Percent Cumulative Percent strongly agree 07 23.3 23.3 23.3 agree 13 43.3 43.3 66.7 not sure 06 20.0 20.0 86.7 disagree 03 10.0 10.0 96.7 ! strongly disagree 01 3.3 3.3 100.0 Total 30 100.0 100.0 Source: Prima,y data May 2016 Table above shows that 43.3% ( I 3)of the respondents agreed that E tax had increased compliance due to reduced bureaucracies at URA offices and 23.3% (07)strongly agree. \'his finding is true since one can access the services anywhere via the internet. 50 Table 37: Showing findings on if application of E tax had enabled URA handle more taxpayers in a given period compared to previous systems Frequency Percent Valid Percent Cumulative Percent strongly agree 8 26.7 26.7 26.7 agree 18 60.0 60.0 86.7 not sure 4 13.3 13.3 100.0 Total 30 100.0 100.0 Source: Primary data May 2016 From table above, 60.0 % (18) of the respondents agreed that application of E tax had enabled URA handle more taxpayers in a given period compared to previous system. Table 38 :Showing findings on if the E tax had led to improved transparency in administration of taxes Frequency Percent Valid Percent Cumulative Percent strongly agree 4 13.3 13.3 13.3 agree 14 46.7 46.7 60.0 not sure 9 30.0 30.0 90.0 disagree 3 I 0.0 10.0 100.0 Total 30 100.0 100.0 Source: Primary data May 2016 Table above indicates that 46.7% (14) of the respondents agreed that E tax had led to impro,ed transparency in administration of taxes. Considering responses in Section two above, the result in this section indicates that the introduction of E Tax has led to more transparency in tax administration. Table 39: Correlation between relationship between Electronic tax filing system and Tax compliance at Uganda revenue authority Electronic tax Tax compliance at filin!! svstem U<>anda revenue authoritv i Electronic tax filing Pearson I .513(**) system Correlation Sig. (2-tailed) .004 N 30 30 Pearson ! Tax compliance at .5 I 3(**) I . Uganda revenue Correlation i i authority Sig. (2-tailed) .004 -· -1 N 30 30 ** Correlation is significant at the 0.01 level (2-tailed). 51 From table 4.6 above, it is evident that there is a significant positive relationship between Electronic tax filing system and Tax compliance at Uganda revenue authority indicated b) Pearson's coefficient r = 0.513 (**), p>0.0 1. This means that as long as E Tax is well applied. there will be Electronic tax filing system. 52 CHAPTER FIVE DISCUSSION OF FINDINGS, CONCLUSION AND RECOMMENDATIONS 5.0 Introduction. This chapter summarizes all findings repo11ed in chapter four according to questions of the study, draws conclusions, suggests recommendations and also proposes some areas for further study. 5.1.0 Discussion of Findings 5.1.1. The components of E-tax service system. According to the study concerning, E-tax service system and its Adoption at Uganda Revenue Authority, findings indicate that URA has successfully implemented the adopted E-tax program as most of the respondents sampled were aware about the existence of E-tax services. However despite the existence of the success achieved by URA the failures still exist as respondents could not easily give reasons for the adoption of E-tax. Respondents still say the} lack computer knowledge and through training about the E-tax service system and its use. Findings also indicate that there are many components in the E-tax service system which can be used by both the taxpayers and the URA officials and therefore the only need that is required is to inform their users about the E-tax services' existence and importance to enable the rate of use to increase. 5.1.2. The reasons for the adoption and the successes attained of E-tax system by URA. Results establish that there are benefits derived from the existence and adoption of E-tax service by URA and therefore many of the respondents were able to testify and therefore give some of the benefits that they had realized as the researcher discussed with a few respondents she approached during the study. Despite the failures realized with the adoption of E-tax service system, URA has managed to increase revenue collection level. level of filing returns and therefore compliance with the tax regulation meaning late filing which cause a lot of penalties have reduced hence a positive implication. 5.1.3. Level of Tax Compliance The study found out that the level of tax compliance is low among the tax payers and the, attribute this to the high tax rates, taxpayers' attitude towards URA, the large informal sector which encourages tax evasion. The low level of tax compliance was also attributed to the lo\\ compliance culture, in an interview with management they expect the level of compliance to 53 improve due to the measures that are being emphasized for example tax education. tax counseling, introduction of large tax payers office among others. The study findings revealed that SMEs in Uganda consider interpretation of tax regulations. taxplanning and functional competencies and business operational competencies as the major components of their tax competencies. These findings are supported by Dennis-Escoffier, Kern & Rhoades-Catanach, (2009) and Strobel. (200 I) who categorise core competencies in tax curriculum into three major areas of Functional competencies (focusing on problem identification and potential solutions), Personal competencies (which includes skills for professional conduct, problem-solving, decision-making, interaction. leadership and communication) and lastly Broad Business Perspective Competencies (competencies relate to how professionals perform their services in both internal and external business environments). all these are similar with the study findings that categorise tax competencies in three factors of interpretation of tax regulations, tax planning and functional competencies and business operational competencies. This is corresponding to the findings of Chattopadhyay and Das-Gupta, (2002) who said that large compliance costs could be responsible for the high tax gap in developed countries given the fact that such economies relatively have efficient tax administration. More so, Niemiowski, Baldon & Wearing, (2003) argued that some taxpayers put off tax repmting and completing returns because they could not afford to use the tax agents who are equally expensive. Similarly, in developing countries Kayaga. (2007) found out that tax la\\s put a large cost burden upon small enterprises and force them to operate outside official ta:-. reporting system. However because of the limited literature on tax compliance cost, surveys in developing and transition countries can be used to provide richer detail about the tax compliance burden for businesses than might be available from standard international benchmarks (Coolidge 20 I 0) 5.1.4 .Whether electronic tax filing system has reduced tax compliance costs of tax payer's Basing on the findings from the study, it is evident that the attitude of tax payers and that of URA staff is positive as a considerable number viewed the use of the system as being good. So. a lot has to be done by URA to make these people like the system more. More so. findings from the study indicate that the new system has increased costs of complying with URA on the 54 tax payer's side but however, taking it in mind that the system is in its genesis, improvements may be done to avert the same. Findings from the study do show that the new system is good but is overwhelmed by the number of users consequently resulting into inconveniences like loss of tax payers· considerable working time. Rakodi, (2002) argues that innovative ways of increasing citizen influence, improving the perceived revenue performance agencies and ensuring greater collection procedures can be identified, at the national but more commonly at the local le1el. This is in line with O'connell (2002) who found out that improved collection procedures calls for monitoring the performance of those responsible for perceived revenue performance. In suppo11 of the study findings, studies by Tan & Chin-Fatt (2000), and Jackson & Milliron (1989) accepted that there would be low tax compliance among taxpayers if their tax la11 knowledge and experience about tax is low. Accordingly the study by Eriksen & Fallan ( 1996). indicate that as the level of tax knowledge increase, the rate of tax evasion is decrease. and the level of tax compliance become much higher. It shows that the level of tax knowledge is one of the best devices to reduce the tax evasion among taxpayers. Additionally, tax knowledge which relates to the ability to understand and interpret tax regulations influences tax compliance behavior among taxpayers (Ahmad, Hanefah & Noor, 2007). In their study they argued that there was a significant difference between tax payers who had tax knowledge and taxpayers who did not have tax knowledge on tax compliance among taxpayers for the case of Malaysia 5.2 Conclusion. Basing on the findings as discussed URA has successfully adopted and implemented, however. there are still other failures as established, there URA should endeavor to eliminate the failures to enable better services and increase the rate of adoption of E-tax services. 5.3 Recommendations. System monitoring, this should be done at the implementation stage to enable the URA revie11 all that is on the URA web portal and therefore change where the need arises and for better service delivery to the users of the E-tax services. System testing and validation, this should be done to enable checking for any kind of errors that would be within the system, to avoid inconveniences with the user (the tax payers and the URA officials). 55 URA should call the taxpayers for training at the different branches to enable sensitization about the services that are rendered and therefore communicate all the reasons for the adoption of E-tax service as this will motivate the uses of the service, hence increase in the rate of compliances. URA should inform the government to enable E-tax services to be extended to higher institutions of learning, for effective training right from formal education level to the field. URA should find ways of reducing the URA web portal disturbances which is ever on and off especially at the time of deadlines, that is when filing VAT, income tax returns and man) others to avoid penalties caused due to the web portal network. The tax administration so as to provide individuals and groups with guidance on how to improve bookkeeping standards and tax returns. Generally, tax counseling offices should be established country wide so as to provide advice on the interpretation and application of tax laws, procedures for filing returns and applications. This will also enhance tax compliance. Tax education is a part of public relation activities, which can play an important role in creating tax awareness hence improving on the level of tax compliance. Prizes should also be given to those who comply and pay their dues in time and with the correct amount, this will help to attract more people to comply. The registration programs should be developed to bring the high number of qualified but non registered corporation tax payers into the tax net. Increasing corporation tax registration threshold should be considered in order to have a manageable taxpayer register. In view of URA respondents, policy proposals for reviewing the schedules that specify exemptions in the corporation tax legislation should be passed with more caution so as to limit proliferation of tax benefits and loopholes that drastically reduce tax collection and minimize corporation tax productivity. For SMEs to improve their tax competencies, those involved in their tax matters need knowledge and skills to interpret the various tax laws and regulations, they also have to cart') 56 out tax planning, possess functional competencies and business operational competencies. This will enable them comply with their tax requirements Also tax compliance procedures should be simplified because in most cases they are found to be very complicated for SMES, especially for those who do not keep proper books of account and sometimes do not understand the tax laws in order to reduce the compliance costs in terms of money and time. With reference to the finding, high compliance costs reduce the compliance levels of SM Es. this call for the need to take into account the tax compliance costs incurred by the taxpayers when tax rules are being designed by policy makers. Sensitization programs should be intensified to increase staff awareness and taxpayer appreciation of existing automation projects. As most of the small taxpayer respondents were found to be Information Technolog) ( IT) illiterate, they suggested that URA should introduce e-tax gradually and if need be, run both manual processes and the automated processes concurrently in order not to drive them out of their small businesses. Increasing corporation tax registration threshold should be considered in order to have a manageable taxpayer register. Emphasis of corporation tax administration should be shifted to tax payer audits so that a reasonable propo1tion of registered tax payers to be audited annually to suppo1t the self assessment system. 5.4 Areas for Further Research The researcher suggests the following as areas of fu1ther research; • The influence of e-tax on tax administration • The impact of e-tax on tax evasion and avoidance. • The impact of e-tax on tax payer relational norms. 57 REFERENCE Alm, J and Torgler, B. (2006). Culture differences and tax morale in the United States and Europe. Journal ofeconomic psychology, 27(2), 224-226. Anna, A. (2009) Adoption of tax e-filing: A conceptual paper, Retrieved on 17/02/2014 from http://www.academicjournals.org/aj bm/pdf/pd/20 I 0/May/ Azm i%20and%20 Kamaru lzaman. pd fanges Baingana, E. (20 I I). 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Evidence from multi-cultural European countries. Uganda Revenue Authority. Electronic Tax Registration, 20 I 0 Wenzel, M. (2004). Analysis of norm processes in tax compliance. Journal of Econo111ic Psychology, 24(6), 213-22. 60 APPENDIX I: QUESTIONNAIRE Dear Respondents I am Ahurira Amon a student of the bachelor of Business Administration degree at Kampala International University and am carrying out my research about the electronic tax filing sys1e111 on tax collection and tax compliance: A Case Study Of Uganda Revenue Aulhority Mharara Branch. This is one of the requirements to get this degree. Please kindly help the researcher in this study by answering the following questions in a way you feel appropriate. Your response will be only for academic purpose and will be treated confidential. Questionnaire to investigate the influence of the electronic tax filing system on tax collection and tax compliance to be filled by Uganda Revenue Authority Staff. The following abbreviations will be used: Strongly agree (SA), Agree (A), Not Sure (NS), Disagree (D), and Strongly Disagree (SDA) SECTION: BACKGROUND INFORMATION I. Name of the station ...... 2.Sex a. Male: b. Female: 3. How long have you served in domestic taxes department (please tick what applies to )OU) a. I year: b. Between 2 and 5 years c. Between 6 and IO years : d. Above IO years 4. The qualification level of the respondents a. Diploma I (b) Bachelor's Degree ( c) Post graduate SECTION B: THE COMPONENTS OF E-TAX SERVICE SYSTEM. 5. Could E-tax service system be having several components? Yes ~I -~I No ~I-~ 6. If yes, suggest some components of E-tax service system. a) ______b) ______c) ______d) ______ 61 7. Are the components of E-tax service system easy to comprehend? Yes No 8. If yes, give reasons as to why the components are easy to comprehend. a) ______b) ______c) ______d) ______ 9. Ifno, give reasons why. a) ______b) ______c) ______d) ______ 8. The following abbreviations will be used: Strongly agree (SA), Agree (A), Not Sure (NS), Disagree (D), and Strongly Disagree (SDA) Statements SA A NS DA I S[)A' I The URA staff and taxpayers are trained and educated on E tax I I I matters ' As a registered taxpayer I file returns using E tax system ' i I - - I pay taxes using the E tax system as a registered taxpayer ' ' Banks are enhancing E Tax application for me as a taxpayer I ! There is a negative effect of power interruptions and low !' connectivity speed of internet on the application of E tax I ' 9. Please state in your view the major weaknesses of electronic tax ...... ...... , ...... I 0. How can the above weaknesses be overcome? ..... , ...... , ...... 62 SECTION C: THE REASONS FOR THE ADOPTION AND THE SUCCESSES ATTAINED OF E-TAX SYSTEM BY URA. 11. Are there successes achieved with the adoption of E-tax service system by URA? Yes I I No 12. If yes, suggest any sucesses achieved with the adoption ofE-tax service system9 a), ______b) ______c) ______d) ______e) ______ SECTION D: LEVEL OF TAX COMPLIANCE. Statements SA A NS DA /SDA' I pay my taxes willingly because I know the benefits. ' I I I always pay my dues at the right time and in the right amount. I hate paying taxes because tax rates are too high. The low compliance culture among tax payers affects the level of tax compliance. The large informal sector in Uganda contributes to the low levels of tax compliance. I Tax payer's attitude towards URA affects the level of tax compliance. I The low level of tax compliance could be as a result of low tax intention to pay taxes. The level of tax compliance is expected to improve in Uganda ' The business or company discloses all income earned for tax purposes ! . The business /company makes correct and accurate assessments annually I The company consistently follow tax laws when making assessments i The business or company annually files tax returns with the tax I I authority promptly. ' ' The business or company always file tax returns on time I ' ' I 63 SECTION D: To establish whether electronic tax filing system has reduced tax compliance costs of tax payer's. 13. What is reason to evaluate the efficiency oftax administration? 14. What is your view about the use of the electronic tax filing system? a. Very Good b. Good c. Fairy Good d. Others (Specify) ...... 15. Are there sucesses achieved with the adoption evaluating the efficiency of tax administration using E-tax service system by URA? (a) Yes 16. If yes, suggest any sucesses achieved with the adoption evaluating the efficienc) of ta, administration using E-tax service system? a) ...... b) ...... c) ...... ··········· ...... ········ ...... d) ...... Statements SA A NS DA I SDA I i E tax is internet based and considering that not all businesses have internet services in their office premises it may lead to an increased in ' the cost of tax compliance I The E -Taxbeinga24-Hour service has improved my ability to file I i' returns on time ' Procedures in E- Tax system reqwre that l keep proper record of ' business transactions for easier assessment of returns I ' E- Tax has increased compliance due to reduced bureaucracies at URA ! I offices I The E -Tax has led to improved transparency in administration of taxes I .. '-- --- Correlation between electronic tax filing system on tax collection and ' tax compliance I i 64