The paper examined the influence of tax understanding and tax awareness in relation with tax complianc in Nakawa division, Kampala district, Uganda, while considering the moderating role of public trust. A cross sectional research design has been adopted for this study. Using both convenient (for SMEs) and purposive sampling (for the respondents) methods, data has been obtained using a questionnaire from 120 Small and Medium-sized enterprises (SMEs) in Nakawa division. Data was analyzed using descriptive statistics, correlation and the linear regression analysis (Ordinary least squares regression model).
The empirical results indicate that both tax understanding and tax awareness have a positive significant impact on taxpayer compliance among SMEs. The study further indicates that public trust plays a moderation role on the relationship between tax understanding and taxpayer compliance among SMEs in Uganda. However, the relationship between tax awareness and taxpayer compliance in SMEs is not moderated by public trust. The government should therefore put rigorous measures/policies in place to govern and strengthen the tax administration system. This will in turn create a sense of accountability and a perception of good governance to the taxpayers, forcing tax compliance in the long run.
Keywords: Tax understanding, tax awareness, tax compliance and public trust