EFFECTS OF MULTIPLE TAXATION ON THE PERFORMANCE OF SMALL AND MEDIUM SCALE BUSINESS ENTERPRISE
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EFFECTS OF MULTIPLE TAXATION ON THE PERFORMANCE OF SMALL AND MEDIUM SCALE BUSINESS ENTERPRISE
Chapter one
INTRODUCTION
1.0 Introduction.
Taxation in Nigeria has a long history that predates colonialism. Prior to colonisation, the several entities that became known as Nigeria were separate.
To support the monarchs, multiple taxation systems existed in the form of obligatory services, contributions of products, money, labour, and so on among the various kingdoms, ethnic groups, and tribes ruled by the Obas, Emirs, Ezes, Attahs, Ohinoyis, and Amanyanabos.
The deportation of King Jaja of Opobo in 1893, as a result of his objection to imperialist taxation, demonstrates this argument. Traditional monarchs placed levies on their citizens in various ways.
These taxes included “Zakkat,” which was charged on Muslims for educational, charitable, and religious purposes, as well as “Kudin-Kasa,” which was a type of agricultural tax on land use. Shuka-Shuka levied on the ownership of cattle based on the number of cattle; “Ishakole”- contribution of farm products
as a form of land tax, in exchange for the use of land for agricultural purposes, payable to Obas, Chiefs, family/community heads; “Owo-Ori”, that is individual taxes payable in cash or kind in return for services; war-tax, payable by a vanquished community to the victors
Taxation can simply be defined as a mandatory transfer or payment of funds from private persons, institutions, or groups to the government. It can be imposed on wealth or income in the form of a sure-charge on prices. Taxes are thus a part of a country’s land and labour production that is placed at the disposal of the government.
Multiple taxation, on the other hand, refers to the government imposing various sorts of taxes on the people that could have been combined into a single large tax form. Levies are also used to refer to certain taxes.
However, in the context of this work, all forced payments made by individuals and institutions to the government are considered tax. Taxes generally serve as a source of money for the government, allowing it to carry out its tasks.
This is why Ojo (2010) described tax as a method by which the government appropriates a portion of the private sector’s income and spending as revenue for the aim of paying recurring expenditures and establishing public capital formation to support the development and growth of the economy’s goods and services.
A good tax has the following characteristics: fairness, convenience, simplicity, a low cost of collection, and few distortions. According to Musgrave (2013), taxes should be chosen in such a way that they do not interfere with economically effective markets.
The imposition of additional burdens should be minimised. Again, a good tax system should allow for efficient and non-arbitrary administration while also being understandable to taxpayers.
1.1 Background of the Study
In recent years, the global economy has grown considerably, which has been connected to the activity of small and medium-sized firms (SMEs), particularly in developing nations. According to a federal office of statistics assessment, small and medium-sized firms account for 97% of Nigeria’s productive units (Ariyo, 2005).
Although smaller in size, they are the most important enterprises in the economy because when all of the individual effects are aggregated, they outperform larger companies because the importance of small businesses in Nigeria as job creators, particularly for those with low skill levels, is widely recognised.
Small, medium, and micro enterprises (SMME) account for 36.1% of the country’s GDP and employ 68.2% of the private-sector employment. For example, in agriculture, construction, and retail, (SMMEs) employ more than 80% of the entire workforce, with their contribution to GDP increasing in recent years, underlining the sector’s job development potential.
The social and economic benefits of small and medium-sized businesses cannot be emphasised. According to Panitchparkdi (2006), SMEs provide employment, competition, economic dynamism, and innovation, all of which promote the entrepreneurial spirit and skill dissemination.
Because they have a smaller geographical presence than large corporations, for example, in terms of the location or site of the business and the cost of establishing the business, small and medium-sized enterprises can manage a piece of land space and start a business with less capital.
Because they are very innovative, they make better use of our natural resources, which increases the country’s wealth through improved production. Small and medium-sized businesses have clearly improved the level of living for many individuals, particularly those in rural areas (Aryo, 2005).
However, the mortality rate of these small businesses is very high due to financial constraints, such as the fact that the majority of funds come from a single source (the sole proprietor), inadequate management skills, a lack of staff training, a lack of incentives, and a lack of worker enthusiasm. According to the Small and Medium Scale Enterprises Development Agency of Nigeria (SMEDAN), 80% of SMEs expire before their fifth anniversary.
1.2 Statement of Problem
The various levels of government, including villages, local government areas, and states, apply a variety of taxes, including levies rates, which have an impact on their operation. The tax burden is a serious issue in Nigeria because many commercial organisations are not favoured by the tax systems and policies in place.
Although there is a broad view that taxes are an important source of funding for economic development and the provision of social services, the challenges arise from the negative link between taxes and the ability of businesses to survive and expand.
SMES face the challenges of high tax rates, numerous taxing, complex tax legislation, and a lack of sufficient illumination or education on tax-related issues. Not to mention the other challenges that SMEs face in other developing countries such as Nigeria:
insufficient capital, poor technical and managerial skills, environmental consequences, and government regulations, which are a worm eating a large chunk of the revenues generated by these SMEs for their growth and survival. These have resulted in an increase in the number of Small and Medium Scale Enterprises.
1.3 Objectives of the Study
The overall goal of this research is to investigate the impact of numerous taxes on the performance of small and medium-sized businesses in Akwa Ibom State.
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