Impact of Nigerian Tax Policies on the Economy and Small Business in Nigeria
CHAPTER ONE
OBJECTIVES OF THE RESEARCH
In-order to achieve the purpose of this research, the following are the objectives of the research:
- To identify the challenges of Nigerian tax policies.
- To examine the influence of multiple taxation on small businesses and the economy as a whole.
- To identify ways of properly addressing the challenges of Nigerian tax policies in order to favour small businesses as well as encourage tax compliance.
CHAPTER TWO
REVIEW OF RELATED LITERATURE
Introduction
Small and medium enterprises (SMEs) form the core of majority of the world’s economies. A study carried out by the Federal Office of Statistics shows that in Nigeria, small and medium enterprises make up 97% of the economy (Ariyo, 2005). Although smaller in size, they are the most important enterprises in the economy due to the fact that when all the individual effects are aggregated, they surpass that of the larger companies. The social and economic advantages of small and medium enterprises cannot be overstated. Panitchpakdi (2006) sees SMEs as a source of employment, competition, economic dynamism, and innovation which stimulate the entrepreneurial spirit and the diffusion of skills. Because they enjoy a wider geographical presence than big companies, SMEs also contribute to better income distribution. Over the years, small and medium enterprises have been an avenue for job creation and the empowerment of Nigeria’s citizens providing about 50% of all jobs in Nigeria and also for local capital formation. Being highly innovative, they lead to the utilization of our natural resources which in turn translates to increasing the country’s wealth through higher productivity. Small and medium scale enterprises have undoubtedly improved the standard of living of so many people especially those in the rural areas. In order to tackle global challenges impeding sustainable human development, world leaders came up with the Millennium Development Goals (MDGs) in 2000, were expected to be met by 2015. The first of these MDGs is “to eradicate extreme poverty and hunger”. Consequent upon this, it became very pertinent for the nations of the world to create strong socio-economic structure that would serve the interests of majority of their citizenry, especially the poor. Since then, different countries have been working to raise the living standard of their citizens in order to achieve this goal, among other Millennium Development Goals. With globalization and economic liberalization, global economic activities have significantly increased over the recent past, bringing about corresponding increase in global wealth, which is said to have almost doubled since 1990 (SNV/WBSCD, 2007).
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 investigate the effect of Nigerian tax policies on the economy and small businesses in Nigeria
Sources of data collection
Data were collected from two main sources namely:
Primary source and 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.
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 Nigerian tax policies on the economy and small businesses 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 tax policies on the economy and small business in Nigeria.
Summary
Given the emphasis on, and the increasing number of SMEs in Nigeria, there is need to take stock of the state of SME development in the country and review the effectiveness of existing policies and institutional framework, with the aim of developing guidelines for future utilization in this sector. There should be a shift to promote SME development by creating an enabling policy environment, which fosters SME competitiveness and reduces the transaction costs for smaller companies. It is important to pay attention to the fact that the removal of regulatory and administrative barriers is expected to encourage enterprises operating in the informal economy to formalize their structures, which is a pre-condition for expanding their operations
Conclusion
From the foregoing, it can be concluded that SMEs play an important role in the growth and development of the Nigerian economy. It can also be concluded that a friendly tax policy is instrumental to the survival and growth of these small and medium enterprises. However, taxes for SMEs have been more harmful than beneficial as they increase running costs and slow down growth. Most of the SMEs surveyed are faced with the problem of high tax rates, multiple taxation, complex tax regulations and lack of proper enlightenment or education about tax related issues. Therefore, if SMEs are to flourish, an appropriate tax policy which will not be an encumbrance to SMEs and which will also encourage voluntary compliance needs to be on ground.
Recommendations
Small and Medium Enterprises should be levied lower amounts of taxes so that they will have enough funds for other activities that will lead to business growth. Furthermore it will help SMEs get better equipped to survive in a competitive market.
The government should consider increasing tax incentives and exemptions as this will not only attract investors who are potential tax payers, it will encourage voluntary compliance and ultimately leads to expansion of existing business interests of the SMEs in Nigeria.
Reference
- Aderemi, A. (2003). Small and Medium Scale Enterprises: The Nigerian Situation. [Power Point Slides] Capital Partners Limited. Retrieved from www.capitalpartnersltd.com/Small%20Medium%20Scale.ppt
- ADB (2002). Technical Assistance for the Development of a Framework for SME Support. Asian Development
- Ariyo, D. (2005): Small Firms are the Backbone of the Nigerian Economy. Retrieved October 22nd, 2010, from http://www.africaeconomicanalysis.org/articles/gen/smallhtm.html.
- Aryeetey, 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.edu/bitstream/30594/1/cr050103.pdf
- Beck, T., Demirguc-Kunt, A. & Levine R. (2005): Smes, Growth, and Poverty: Cross Country Evidence. NBER Working Paper 11224, National Bureau of Economic Research. Retrieved from http://www.nber.org/papers/w11224.pdf
- Bank. Drucker, P. (1985). Entrepreneurship and Innovation
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- Eftekhari, A. (2009): Economic Theories of Taxation the Factors Involving in a Tax Policy. Suite 101.com. Retrieved from http://www.suite101.com/content/economic-theories-oftaxation-a111542.
