Abstract This study was to establish the relationship between income tax administration and profitability of small-scale business enterprises in Kikuubo B. Kampala Central. The study aimed at assessing the profitability of business enterprises in Kikuubo B. Kampala Central; finding out if taxpayers are aware of all their tax obligations, know how income tax is administered, policies and problems affecting them as well as their businesses. The study was guided by the following research objectives; to establish how income tax administration is administered and imposed on small-scale business enterprises, to assess the profitability of small-scale business enterprises, to establish the relationship between income tax administration and profitability of small-scale business enterprises in Uganda. The study applied both qualitative and quantitative research designs where interviews and Questionnaires were used. Data was collected from both primary and secondary sources. Data was processed and analyzed using formal tables, pie charts, graphs, narrative text, and correlation to find out the relationship between income tax administration and profitability of small scale businesses. A total of 50 respondents were considered out of the entire population in the Town Council. The findings revealed that income tax administration is poor and this was shown in the findings that indicated that the business community is not adequately sensitized, tax rates are at times high and they are based on estimates. Tax rates do not take in to account the circumstances in which small businesses operate, that has negatively affected the profitability of the small scale businesses leading to low capital employed, high expenses incurred, low sales made and the average amount of taxes paid annually being so high. In conclusion, therefore, URA needs to carry out an extensive survey-based analysis of small firms profit margins to determine presumptive tax rates, which will not affect the small business earners. The researcher therefore, recommended that, URA; should supply tax assessment forms in time, intensify on the sensitization campaigns of the taxpayers, employ competent staff, educate the business community about its different tax rates and introduce a scheme that allows taxpayers to pay the tax obligation in installment to better the profitability of smallscale businesses. There is therefore need for more research on firms' management techniques, the role of bookkeeping and profitability of small and mid-size enterprise.
