Effect of Multiple Taxation on Business Survival in Nigeria
Chapter One
OBJECTIVE OF THE STUDY
The main objective of this study is to ascertain the effect of multiple taxation on the growth and development of small-scale enterprises in Nigeria. But to aid the successful completion of the study, the researcher intends to achieve the following sub-objectives;
- To ascertain the effect of multiple taxation on the growth of small scale enterprise
- To ascertain the relationship between multiple taxation and the growth of small scale enterprise
- To investigate the consequences of multiple taxation on the profitability of small scale enterprise
- To ascertain the impact of multiple taxation on the non- survival of small scale enterprise.
CHAPTER TWO
REVIEW OF RELATED LITERATURE
Introduction
For some decades now, Nigeria has depended on oil for its major income and foreign exchange. Oil accounts for about 80 percent of federal government revenues, and 95 percent of foreign exchange earnings. The National Centre for Economic Management and Administration (NCEMA) reports that Nigeria, with a population of about 120 million, is Africa’s most populous country and the continent’s third largest economy yet it still remains one of the poorest oil producing countries. With a continuously declining per capita income, comparatively unfavorable social indicators, dynamic world economy and the fact that countries are looking into alternative sources of energy it is time to begin to look into alternative sources of income for sustenance in the long run when the demand for oil will dwindle to nothing. Even with the present rates of petroleum products, Nigeria’s CDP is below ideal with the SMEs contributing therefore it would not hurt to diversify the economy even before the demand for petroleum products finally diminishes. This means it is time to begin to give more attention to the other sectors of the economy. This translates into looking at non-oil based sectors in Nigeria such as agriculture, manufacturing, commerce and tourism. These industries are primarily made up of SMEs as such it goes without saying that SMEs are important to the Nigerian economy. The country is blessed with fertile farmlands, vast mineral deposits and a wealth of human resource, making it a very favorable place for small arid medium enterprises. These resources have p laced Nigeria in a prominent position in Africa, For governments, however, large companies are a more attractive, more clear-cut and less complex set than SMEs, In designing public policies, particularly tax policies, governments have usually targeted their strategies to large companies (Holban, 2007). Therefore, there is a need to devise methods to encourage the growth and development of these enterprises so as to ensure that they reach their full potential. Subsequently, a favorable business and regulatory environment needs to be created for them to thrive. Thus, for this study, the focus will be on supporting SMEs growth through tax policy. Most large companies have their roots in small and medium enterprises; they started out as SMEs before expanding. This means that the future large corporations are the SMEs today that should be nurtured to ensure their growth. Furthermore, they are generally perceived to be the seedbed for indigenous entrepreneurship and generate all the many small investments, which would otherwise not have taken place (Aryeetey & Ahene, 2004).Therefore, Nigeria needs to further the development of its private sector by creating an environment favorable to the growth of SMEs, strengthening the factors that lead to business success, and addressing the problems threatening the existence and advancement of small and medium enterprises (Chu, Kara & Benzing, 2008) With the dismantling of trade and other barriers, the world has been transformed into a global village. Consequently, SMEs in developing countries are struggling to survive under intense competitive environments both domestic and international. In developing countries like Nigeria, there is an urgent need to provide the required enabling environment for the development of SMEs, so that they could adequately play the role expected of them in economic transformation, Such role includes mobilization of domestic savings for investment, appreciable contribution to gross domestic product, increased harnessing of local raw materials, employment generation, and significant contribution of poverty reduction efforts through sustainable livelihoods and enhancement in personnel income, technological development and export diversification (Smatrakalev, 2006). It is for this reason that an ideal tax policy needs to be adopted in order to ensure economic growth and proper utilization of resources. However this is not the case because taxes which are levied for regulating the investment behavior of the households and not for suffocating any entrepreneur initiative seem to be a major constraint to the development of the SMEs they are out to cater for. Olorunshola (2003), the concept of SMEs is relative and dynamic. The characteristics of SMEs are uncertainty, innovation and evolution. A firm understanding of SMEs world required a good knowledge of its features. In Nigeria SMEs are usually small in size and lack large organizational structure and management culture while the urban SMEs are more structural, the rural ones are less structured. This represents one of the most important characteristic of SMEs in Nigeria. SMEs are in most cases a one man business or partnerships enterprise, although they many be registered as limited liability company, (Udechukay, 2003). Olurunshola (2003) affirmed that this ownership style has led small and main enterprise to have a simple management structure and make it easiest to manage than that of large firms, and few numbers of staff and in some cases low level of education by some owners of SMEs. SMEs almost shave the same characteristic with a sole proprietorship in that, there is no legal personality between the SMEs and their owners, which means that the life span of SMEs depends on the life of the owners; when the owner dies, if not properly taken care by the estate the business will die with the owner(s) Another feature of the SMEs sector in some countries is its heterogeneous nature, ranging from retail outlets to hugely paid professionals and substantially manufactured organisation small and medium enterprise are also likely to vary in organizational form, from sole proprietorship (one man business), scale corporations (public or private), professionals and partnerships. Furthermore, the process of production in SMEs setting are Labour intensive and they always serve as supplier to the large manufacturing firms by depending on raw materials sourced locally (Hanefah, Ariff and Kasipfflai, 2002). Just like a one man business SMEs also required low start up capital than large companies (Akinsulise, 2010). Also, the decision of manager have higher tendency to be subjective as they are controlled by the same person and the employees employer relationship found in most SMEs is predominantly informal. In addition, the contribution SMEs usually make to tax revenue is lower than its contributions to output and employment (International Tax Dialogue, 2007), that not with standing SMEs have not become competitive enough to increase their shave of output even though they form three fifths of the number of manufacturing industries which are solely rely upon by large manufacturing companies for their supplies (products) (Hanafah et al. 2003). Depending on the country’s international standing at any point in time and the economic policies adopted by government, the importance of the various source of revenue varies from time to time. Nigeria has mixed economy i.e., government undertakes commercial investment alongside the private sector with social oriented economic policies, government undertakes greater commercial investment. Though taxation may not be the most important source of revenues to government in term of the magnitude of revenue derivable from taxation however, taxation is the most important source of revenue to the government, from the point of view of certainty, and consistency of taxation. In a social oriented economy, only a small percentage of revenue may be derived from taxation while in a capitalist oriented economy, a grater percentage of government revenue, is derivable from taxation (Osita, 2004).
CHAPTER THREE
RESEARCH METHODOLOGY
Research design
The researcher used descriptive research survey design in building up this project work the choice of this research design was considered appropriate because of its advantages of identifying attributes of a large population from a group of individuals. The design was suitable for the study as the study sought to examine the effect of multiple taxation on the growth and development of small scale enterprise in Nigeria
Sources of data collection
Data were collected from two main sources namely:
(i)Primary source and
(ii)Secondary source
Primary source:
These are materials of statistical investigation which were collected by the research for a particular purpose. They can be obtained through a survey, observation questionnaire or as experiment, the researcher has adopted the questionnaire method for this study.
Secondary source:
These are data from textbook Journal handset etc. they arise as byproducts of the same other purposes. Example administration, various other unpublished works and write ups were also used.
Population of the study
Population of a study is a group of persons or aggregate items, things the researcher is interested in getting information on the study effect of multiple taxation on the growth and development of small scale enterprise 200 staff of joint tax board was selected randomly by the researcher as the population of the study.
CHAPTER FOUR
PRESENTATION ANALYSIS INTERPRETATION OF DATA
Introduction
Efforts will be made at this stage to present, analyze and interpret the data collected during the field survey. This presentation will be based on the responses from the completed questionnaires. The result of this exercise will be summarized in tabular forms for easy references and analysis. It will also show answers to questions relating to the research questions for this research study. The researcher employed simple percentage in the analysis.
CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATION
Introduction
It is important to ascertain that the objective of this study was to ascertain the effect of multiple taxation on the growth and development of small scale enterprise in Nigeria
In the preceding chapter, the relevant data collected for this study were presented, critically analyzed and appropriate interpretation given. In this chapter, certain recommendations made which in the opinion of the researcher will be of benefits in addressing the challenges of multiple taxation on small scale enterprises in Nigeria
Summary
This study focused on the effects of multiple taxation on growth and development of small-scale enterprises in Nigeria. The importance of small-scale enterprises in the development of any given economy cannot be over-emphasized, hence, the need to undertake this study. It was equally the focus of this study to examine the various ways multiple taxation affect the investment decision of the operators of SSEs. An examination of the literature on SSEs in Nigeria, showed that most researchers believed that SSEs are exempted from taxes, hence, they carried out research on other constraints being faced by SSEs operators other than taxation. The data employed for this research work was basically survey data as it relates to entrepreneurs of small-scale enterprises. This survey included 200 respondents in the commercial zones of Nigeria.
Conclusion
Small-scale enterprises are vital in many ways employment generation, transformation of the economy and production of goods and services, and as such should not be over burdened with multiple levies and taxes. This is to enable them stay in the business and lend their support to the industrialization processes of the state. In addition to the many problems that Small-scale entrepreneurs face in the country, poor business infrastructure, shortage of financing, high interest rates, corruption, they are still battling with high tax burden ” being imposed on them mostly by the lower tiers of government. When, looking at everything SSEs need to do before beginning operations, the process is far too time consuming and costly, representing a serious deterrent to starting SSEs. It therefore, follows that the unanimity of entrepreneurs listing taxation issues, as their biggest problems cannot be ignored. There are too many taxes and tax-like payments (Levies) being imposed on SSEs. While it is difficult to count them all as the majority are local payments or sector specific.
Recommendations
The researcher therefore recommends that all state and Local Government Authorities should comply with national legislation in force with respect to tax incentives being granted to SSEs. – Independent offices (free from local control) should be set up that monitor the activities of local officials and where entrepreneurs can receive information on their rights and all legislation and regulation in effect. Corruption among tax agents and harassment of entrepreneurs by tax agents need to be tackled. Numerous local taxes should be removed and replace with a possible increase in some of the major taxes. – Governments especially the local governments need to move away from the urge to control all business activities and give SSEs breathing space to more efficiently allocate their resources and decide on activities for themselves. This calls for accelerated administrative Government and tax authorities with the aim of moving from grudgingly lessening the regulatory local to more-of a system where government’s intervention in SSEs is minimal and limited to situations where it is necessary to do so.
Reference
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- Aryeefey, E. & Ahene, A. (2004). Changing Regulatory Environment for Small Medium Size Enterprises and their Performance in Ghana. CRC Working Paper No.30594). Centre on Regulation and Competition (CRC).Retrieved from http:/!ageconsearch.umn.edulbitstream/30594/ 1!Cr05013.pdf.