TAXATION’S EFFECT ON PERFORMANCE IN RIVERS STATE SMALL-SCALE ENTERPRISE
Abstract
The study was conducted to determine the impact of taxes on the performance of small-scale business enterprises (SSBs) in Nigeria, using River State as a case study. The study sought to assess the performance of business enterprises in Rivers state, as well as to determine whether taxpayers are aware of all their tax obligations, policies, and problems affecting them and their businesses.
The study used both qualitative and quantitative research designs, including interviews and questionnaires. The information was gathered from both primary and secondary sources. To determine the relationship between the impact of taxes and the performance of small-scale businesses, data was processed and analyzed using formal tables, pie charts, narrative text, and correlation.
Out of the total population in Rivers state, 50 respondents were considered. The findings revealed that stock levels, capital employed, daily expenses, daily sales, and the average amount of taxes paid annually all have an impact on the performance of small businesses.
Most business owners are aware of taxes paid but are unsure of the method of assessment, and little assistance is provided in terms of tax awareness.
The findings revealed taxpayers’ problems with assessment, collection, and tax collectors, inefficiency by tax collectors, and loss of equipment, sales, and stock as a result of taxes.
Recommendations on the impact of taxes included improving the method of collecting taxes, educating the business community about its various tax rates, introducing a scheme that allows taxpayers to pay the tax obligation in installments, and determining a method of assessing the tax that small scale businesses should pay early in the fiscal year to give the business enough time to pay up their duties rather than making an assessment and demand for payment sponta
1.0 CHAPTER INTRODUCTION
The purpose of the study was to determine the impact of taxes on the performance of small-scale business enterprises in River state. This chapter contains the study’s background, problem statement, the purpose of the study, objectives of the study, research questions, scope, and significance.
1.1 The Study’s Background
Taxation creates pressure for more accountability, better governance, and more efficient government spending by increasing the incentives for public participation in the political process. Taxation also provides incentives for governments to improve their tax collection and administration institutions and to provide more public services (Moore, 2007).
Taxation has existed almost as long as there have been organized governments. The first tax legislation was introduced in 1919, and taxes have evolved through several reforms since then. To broaden the tax base and collect more revenue, the government has had to levy several taxes, particularly on business enterprises in Nigeria, which account for a large portion of the formal sector.
Corporation tax, value-added tax, presumption tax, and exercise duty are among the taxes levied on businesses in Nigeria. The Income Tax Act was passed in 1997. This was to guide tax assessment and computation (Campsy, 1997). Since the inception of the current taxation laws to promote development, the Nigerian government has made some commendable efforts to promote development through taxation. The primary goal of taxation in Nigeria has always been to mobilize the resources required to meet the government’s aspirations.
This is because, for a government to be effective, strong, competent, and capable of spearheading development, resources must be readily available in its treasury to adequately provide goods and services to the people. The Nigerian government has always been responsible for ensuring proper resource mobilization (Musa, 1992).
According to Manasseh (2000), a tax is a compulsory levy imposed by the government on various categories of assessees, whereas taxation is a compulsory and non-refundable contribution imposed by the government for public purposes. In Nigeria, a sizable proportion of businesses are sole proprietorships operating on a small scale, locally owned and managed by individuals or families, and frequently with only a few employees working at a single location (Nigeria development bank report, 1988).
Nigeria’s taxation system is based on the system that existed in Britain when it was a British colony. This also applied to other colonies, including East Africa, which had a single tax system administered by the British. The hut tax regulation, which imposed a standard charge for every hut/dwelling, started this process in 1900.
During that time, taxation was used to generate revenue for the colonial government’s administrative structure, as well as to encourage monetary/economic activity. The collection of taxes was governed by the Local Authority Ordinance of 1991.
The URA was established in September 1991, following a period of review. The URA was in charge of all taxes, including income tax. Since 1992, URA has been organizing and strengthening administrative procedures, and in 1993, this process was aided by a grant of approximately US$ 10 million from the British government.
Rivers state is a Nigerian state. In Portharcourt, the capital of Rivers state, at least 50 small-scale business enterprises were chosen, with almost all of them employing 2-4 people. These small-scale businesses are owned and managed locally by private individuals who occasionally employ family members.
These small businesses face a high tax burden, which has resulted in poor performance. As a result, the researcher undertook the study to learn more about the problem, using Rivers state as a case study to assess the impact of taxes on the performance of small-scale business enterprises.
1.2 Problem description
The government raises taxes to generate revenue that is used to provide public services such as health centers, telecommunication, roads, schools, and electricity, which has helped to improve the performance of small-scale business enterprises. Despite the services provided, the performance of small-scale business enterprises in Rivers State remains poor.
This could be due to the increasing tax burden caused by annual revisions to tax rates. These rates appear to be rising (Gordon and Dawson, 1987), which has resulted in the closure of some small-scale businesses. This prompted the researcher to conduct additional research on the impact of taxes on the performance of small-scale business enterprises.
1.3 The study’s goal
The study’s goal was to assess the impact of taxes on the performance of small-scale business enterprises in Rivers State.
1.4 The study’s objectives
1. To evaluate the performance of small-scale businesses in Rivers State.
2. Determine whether or not taxpayers are aware of all of their tax obligations and policies.
3. To identify issues affecting taxpayers and their businesses.
1.5 Research concerns
1. How are small-scale businesses faring in Rivers State?
2. Are taxpayers aware of all of their responsibilities?
3. What are the issues that taxpayers face?
1.6 The Study’s Scope 1.6.1 Subject matter
The research focused on small businesses in Rivers State. The study specifically investigated the performance of small scale businesses, tax payers’ awareness of their obligations, tax payers’ problems, and the relationship between taxes paid and the performance of small scale businesses.
1.6.2 Geographical coverage
The research was conducted in Rivers State, Nigeria. The location was chosen on purpose because the researcher worked nearby, making data collection easier.
1.6.3 Time span
The research covered the years 2009-2011. This period was chosen to allow the researcher to obtain coherent information from the respondents by allowing them (respondents) to provide responses that are typical of their opinion based on the observations made during this period.
1.7 Importance of the research
The study’s findings are significant in the following ways:
1. According to scholars and researchers, the study’s findings will contribute to the existing literature on taxation and the effects it has on the economy as a whole.
2. The study will assist the tax authority and government in adjusting tax policies to meet the needs of small businesses.
3. The study will assist future academicians, particularly Nigerian university students, in learning about taxes and the performance of small scale business enterprises.
4. The completion of the study will allow the researcher to gain hands-on experience with research work processing and data analysis. This skill will enable the researcher to handle such related work with accuracy and proficiency.
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TAXATION’S EFFECT ON PERFORMANCE IN RIVERS STATE SMALL SCALE ENTERPRISE