IMPACT OF TAXATION ON PERFORMANCE IN SMALL SCALE ENTERPRISE

IMPACT OF TAXATION ON PERFORMANCE IN SMALL SCALE ENTERPRISE

ABSTRACT

The study was carried out to find out the impact of taxes on performance of small scale business enterprises in Nigeria (SSBs), taking a case study of River State. The study aimed at assessing the performance of business enterprises in Rivers state, finding out if tax payers are aware of all their tax obligations, policies and problems affecting them as well as their businesses.

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 analysed using formal tables, pie charts, narrative text, and correlation to find out the relationship between the impact of taxes and performance of small scale businesses. A total of 50 respondents were considered out of the entire population in Rivers state.  The findings indicated that the performance of small scale business is affected by stock levels, capital employed, daily expenses, daily sales and the average amount of taxes paid annually.

Most business owners are aware of taxes paid, uncertain of the mode of assessment and little assistance is given as regards tax awareness.

The findings revealed the problems faced by the tax payers as regards mode of assessment, collection and tax collectors, inefficiency by tax collectors, loss of equipment, loss of sales and loss of stock as a result of taxes.

Recommendations on impact of taxes included; improvement on the method of collecting taxes, educating the business community about its different tax rates, introducing a scheme that allows tax payers to pay the tax obligation in installment, and finding a way of assessing the tax the small scale businesses should pay early in the financial year in order to give enough time to the business to pay up their duties rather than make an assessment and demand for payment spontaneously.

CHAPTER ONE

1.1 Background of the study

Taxation increases incentives for public participation in the political process and creates pressure for more accountability, better governance, and improved efficiency of government spending. Taxation also creates incentives for governments to upgrade their institutions for tax collection and administration and to provide more public services (Moore, 2007).

Taxes have existed virtually as long as there have been organized governments. The first tax law legislation was introduced in 1919 and ever since then taxes have evolved through a number of reforms. The government in an attempt to widen the tax base and collect more revenue has had to levy several taxes especially on business enterprises in Nigeria which constitute a large part of the formal sector. The taxes charged on business enterprises in Nigeria include; corporation tax, value added tax, presumption tax and exercise duty. In 1997 the Income Tax Act was made. This was to give guidance in assessment and computation of taxes (Campsy, 1997). The Nigerian government has made some recommendable efforts to promote development through taxation since the inception of the current taxation laws for purposes of promoting development. The main objective of taxation in Nigeria has always been to mobilise resources needed to meet the aspiration of government. This is because for any government to be effective, strong, competent and capable of spearheading development, resources have to be readily available in its treasury so as to be in position to provide goods and services to the people adequately. The Nigerian government has always had to ensure proper resource mobilization (Musa, 1992).

IMPACT OF TAXATION ON PERFORMANCE IN SMALL SCALE ENTERPRISE