An Investigation on the Effects of Taxation on the Performance of Small and Medium Enterprises: A Case Study of Lusaka's CBD

This study investigates the effects of taxation on the performance and growth of Small and Medium Enterprises (SMEs) in Lusaka's Central Business District, Zambia. A mixed-methods approach was employed, utilizing a structured questionnaire administered to a sample of 100 registered SMEs. Data were analyzed using descriptive statistics and Chi-Square tests of independence to examine key relationships within the SME tax ecosystem. The analysis revealed three statistically significant findings. First, a significant association was found between business size and tax awareness (χ²(4) = 12.45, p = 0.014, Cramer's V = 0.249), indicating that larger SMEs possess a markedly better understanding of their tax obligations. Second, the level of tax awareness was strongly correlated with tax compliance behavior, with a highly significant relationship to the frequency of timely tax payments (χ²(8) = 28.92, p = 0.0003, Cramer's V = 0.380). Finally, the perceived complexity of the tax system demonstrated an extremely significant association with the belief that the tax environment hinders SME growth (χ²(4) = 42.18, p < 0.0001, Cramer's V = 0.459). The study concludes that the current tax system disproportionately challenges smaller SMEs through a cycle of low awareness, high compliance costs, and systemic complexity, which collectively impede their financial performance and expansion potential Recommendations include the implementation of differentiated, sector-specific tax education programs, the simplification of tax procedures for small businesses, and enhanced transparency from revenue authorities to foster a more supportive fiscal environment for SME development.