The Effect of Section 40D of the Tax Procedures Code Act, 2014, on Taxpayer Compliance Among Small and Medium-Scale Enterprises in the Kampala Metropolitan Area, Uganda

This study examined the effect of Section 40D of the Tax Procedures Code Act, 2014, on taxpayer compliance among Small and Medium-Scale Enterprises (SMEs) in the Kampala Metropolitan Area (comprising Kampala, Wakiso, and Mukono districts), Uganda. The law provided that businesses which paid their principal tax by December 31, 2023, would not be required to pay interest and penalties on overdue tax dating back to June 30, 2023. Drawing on Tax Compliance Theory, Fiscal Psychology Theory, and the Theory of Planned Behavior, the study employed a mixed-methods cross-sectional design. Data were collected through surveys and interviews with 381 SMEs across three districts (Kampala n = 214, Wakiso n = 107, Mukono n = 60) and 28 Uganda Revenue Authority (URA) officers, yielding a response rate of 99.51%. Regression and ANOVA analyses showed that Section 40D had a strong, statistically significant positive effect on both filing and payment of returns among SMEs (β = 0.563, t = 13.13, p < .001 for filing; β = 0.462, t = 11.89, p < .001 for payment). By contrast, URA respondents did not report any significant change in either outcome. The moderating influence of political will was not statistically significant for either group of respondents (interaction term β = 0.045, p = .336 for SMEs; β = -0.426, p = .086 for URA). These results indicate that the tax amnesty increased short-term compliance among SMEs, driven primarily by direct financial relief and awareness rather than by broader political commitment. The study recommends sustained taxpayer education, simplified registration processes, and institutional strengthening to ensure compliance gains persist beyond the amnesty window.

tax waiver; taxpayer compliance; SMEs; Section 40D; Uganda Revenue Authority; political will; tax amnesty; Uganda

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