This study examined the impact of taxation on the performance of small-scale businesses in Kisoro Municipality, Kisoro District, with a particular focus on how taxation influences business profitability, growth, and sustainability. Using a multiple linear regression model, the research aimed to assess the level of taxation, the performance of small businesses, and the relationship between taxation and business performance. The findings revealed a significant negative relationship between the level of taxation and business performance, suggesting that higher tax burdens reduced the profitability and growth potential of small businesses in Kisoro Municipality. The study found that access to capital and finance had a positive and significant impact on business performance. Small businesses with better access to financial resources showed greater expansion, improved operations, and better market positioning. Additionally, business registration, while important, had a marginally insignificant effect on performance, whereas training programs had a significant positive effect. Businesses whose owners participated in entrepreneurial training demonstrated better management and decision-making, leading to improved outcomes. Regression results showed that taxation (β = -0.35, p < 0.01), access to capital (β = 0.42, p < 0.01), and training programs (β = 0.29, p < 0.05) significantly predicted business performance, with access to capital and training programs being positive contributors. The results indicated that taxation, especially in its current form, impedes the performance of small-scale businesses, underscoring the need for policy reforms. Based on the findings, the study recommends that Kisoro Municipality reconsider its tax policies to reduce the financial strain on small businesses. It also calls for enhanced access to capital and the introduction of more entrepreneurial training programs to improve business management and sustainability. These steps, alongside better market access and simplified business registration processes, could foster a more conducive environment for small business growth.