IMPACT OF MULTIPLE TAXATION ON BUSINESS SURVIVAL IN NIGERIA
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IMPACT OF MULTIPLE TAXATION ON BUSINESS SURVIVAL IN NIGERIA
ABSTRACT
Taxation is one of the most important fiscal strategies that any government, like Nigeria’s, may utilise to create economic stability and fund capital spending. The government levies various taxes on the income, wealth, or gain of an individual, family, or business firm in order to benefit the general public.
A tax, in its most basic form, is a financial charge or other levy imposed by a state on a tax payer, who could be an individual or a legal entity in the case of the student researcher, with refusal to pay penalised by law.
Thus, taxation is not a voluntary payment or donation, but rather an enforced contribution exacted under legislative authority. Taxes are levied in money in modern taxation systems such as Nigeria, and they can be used for a variety of functions or purposes such as public order, protection of lives and property
economic infrastructure cures such as roads, public works, social engineering, and the operation of government itself (Carrol et al 2000). Against this backdrop, this project investigates the impact of various taxation on business survival in Nigeria.
Chapter one
INTRODUCTION
1.1 Background of the Study
Taxation is one of the most important fiscal policies that every country’s government may implement to promote economic stability and fund capital expenditures. The government levies various taxes on the income, wealth, or gain of an individual, family, or business firm in order to benefit the general public.
A tax, in its most basic form, is a financial charge or other levy imposed by a state on a tax payer, who could be an individual or a legal entity in the case of the student researcher, with refusal to pay penalised by law. Thus, taxation is not a voluntary payment or donation, but rather an enforced contribution exacted under legislative authority.
Taxes are levied in money in modern taxation systems such as Nigeria, and they can be used for a variety of functions or purposes such as public order, life and property protection, economic infrastructure cures such as roads, public works, social engineering, and the operation of government itself (Carrol et al 2000).
The taxes collected by the government undoubtedly originate from a variety of areas, including personal income tax, corporate income tax, capital gain tax, property tax, education, tax, and task, to name just a few.
The Nigerian government, in a bid to increase money and boost Nigeria’s economic development, has subjected numerous enterprises to multiple taxes that they are mandated or made necessary to pay regardless of the sector in which the business firms operate, or else face the wrath of the law.
A survey conducted by the Manufacturers Association of Nigeria (MAN1) and the Centre for International Private Enterprise (ICIPE) highlighted multiple taxation as the bane of private sector business growth in Nigeria (Anyamvu, 2012).
The survey established the relationship between multiple taxation in the pilot state across the three levels of government and reaffirmed its detrimental effects on private sector growth and enterprises in Nigeria.
According to the poll, it was determined that multiple taxation might lead to divestment and jeopardise foreign direct investment coming into Nigeria, while negatively influencing the competition of existing businesses and their existence.
Furthermore, it was determined that most firms in Nigeria currently regard the tax climate as unfriendly and deterrent to business, emphasising that it causes loss of man hours for both the government and private businesses.
According to Osagie (2012), Nigeria’s tax environment, particularly the policy of multiple taxation, raises the cost of conducting business in the country. In reality, numerous businesses, particularly industrial corporations, have ceased operations or shifted their factories to other West African countries that are regarded more investment friendly.
Against this backdrop, this project investigates the impact of various taxation on business survival in Nigeria. The global economy has recently grown considerably, and this has been related to the operations of Small and Medium-Sized Enterprises (SMEs), particularly in developing countries.
According to a Federal Office of Statistics study, small and medium-sized enterprises account for 97% of the Nigerian economy (Ariyo, 2005). Despite their tiny size, they are the most important enterprises in the economy because, when their individual effects are combined, they outperform larger companies.
The social and economic benefits of small and medium-sized businesses cannot be emphasised. Panitchpakdi (2006) regards SMEs as a source of employment, competitiveness, economic dynamism, and innovation, all of which promote the entrepreneurial spirit and the spread of skills.
Small and medium-sized enterprises (SMEs) contribute to better income distribution since they have a larger geographical reach than large corporations. Small and medium-sized firms have long been a source of job creation and empowerment for Nigerians, accounting for roughly half of all jobs in the country as well as local capital generation.
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 death rate among these small businesses is extremely high. According to the Small and Medium Scale Enterprises Development Agency of Nigeria (SMEDAN) Nigeria, 80% of SMEs fail before their fifth anniversary. Tax-related difficulties, ranging from multiple taxes to large tax burdens, are among the causes of these untimely close-ups.
In many government laws, small and medium-sized businesses are viewed and treated in the same way as giant organisations. However, their size and nature set them apart. Therefore, while dealing with small and medium-sized firms, their particular traits must be recognised.
When levying taxes on these businesses, it is important to analyse how these tax policies might be designed to help SMEs flourish and how to manage them most effectively. The importance of SMEs as a driver of economic growth and development is sometimes overlooked.
They are viewed as minor establishments with little impact on the status of the economy. However, if an enabling environment for these SMEs to thrive is provided through correct regulation, the SMEs sector has the greatest potential to revolutionise our economy.
In the same way, taxes are crucial to the government because they are the primary source of funding for government spending. Individual and business tax revenue is used to fund governments as well as infrastructure such as good roads, water supply, and electricity, all of which are necessary for the smooth operation of these businesses, which are primarily manufacturing companies that rely on these commodities to survive.
However, Holban (2007) proposed that taxation can contribute to development and welfare in three ways: it must be able to generate sufficient funds to finance high-quality public services and social transfers, it must provide incentives for more employment and efficient and long-term use of natural resources, and it must be able to reallocate income.
However, in the case of SMEs, taxation must be done in a way that takes their income and need for survival into account. It is necessary that they be granted a sufficient profit to expand their enterprises.
The tax policy must not encourage SMEs to continue operating in the informal sector or to evade or avoid paying taxes. Furthermore, many small businesses in Africa, particularly Nigeria, prefer to operate in the informal sector since the perceived benefits outweigh the perceived costs.
Firms rarely see their tax payments at work, and compliance costs are considerable, limiting participation. The government is further deterred from collecting taxes from small enterprises since the expense of monitoring and collecting taxes from small businesses by revenue authorities, whose resources are typically limited, can sometimes outweigh the income earned by small businesses (Stem and Barbour 2005).
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