Impact Of Taxation On Financial Performance Of Small Scale Enterprises In Ugenya Sub-County, Siaya County, Kenya

Abstract

The serious decline in financial performance of small enterprises in recent years had led to a decrease in profit available for tax obligation to the government. The need for small business enterprises to generate more returns from its internal sources has therefore become a matter of extreme urgency which has been linked with taxation of small business enterprise, especially in developing countries. Failure of small business enterprise ha grow high, approximately by 80% of the business closed down before the 5th anniversary as a result of tax related issues, coming from multiple taxations to enormous tax burdens. The study aimed to assess the impact of taxation on financial performance of small business enterprises in Ugenya Sub –county, Siaya County in Kenya. To achieve the study aims, the following specific objective was used., To evaluate the impact of level of taxation awareness and knowledge on financial performance of SSEs in Ugenya sub-county., To assess the impact of tax rates on financial performance of SSEs in Ugenya sub-county, To evaluate the impact of tax administration criteria on financial performance of SSEs in Ugenya sub-county., To assess the impact of intended tax purpose on financial performance of SSEs in Ugenya sub-county. Descriptive survey design with both qualitative and quantitative technique was used for the study. Both qualitative and quantitative techniques were collected. The target population was 265 SSBs in Ugenya Sub County. The study used stratified sampling techniques. The study used questionnaire to collect data. Data was analyzed using descriptive statistics, correlations, and linear regressions analysis. Correlation analysis and regression analysis was used to determine the relationship between taxation and financial performance. The study found that business entity is aware of the consequences of failing to pay tax obligations in time. The study found also that taxpayers take low tax rates in Kenyan tax rates in relations to financial performance. The findings indicated that tax administration improve tax payer’s convenience in tax assessment. The Equality of tax administration services provides the largest marginal revenues by reducing tax gaps. The study concluded that tax is a tool for fiscal policy employed by the government to influence the business negatively or positively depending on the nature of business activities in a country. This study recommended that taxpayers should have more Information about taxation not only awareness. There is need to conduct further study on tax awareness/knowledge on financial performance on other sectors.