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Impact Of Taxation On The Operation Of Small And Medium Scale Business
[A CASE STUDY OF SMEs IN ABEOKUTA METROPOLIS]
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CHAPTER TWO
LITERATURE REVIEW
2.0 INTRODUCTION
In this section, the review of literature and opinion of different authorities that has written on the impact of taxation on the operation of small and medium scale business will be checked in other to ascertain the different views of their philosophy on the impact of taxation on the operation of small and medium scale businesses. This chapter will also be explaining the concepts, models and theories that are relevant in the field of taxation and necessary to facilitate a comprehensive analysis and understanding of the research question. A broader definition of taxation and small scale business will be introduced.
2.1 CONCEPTUAL FRAMEWORK
2.1.1 TAXATION
Taxation is seen as a burden which every citizen must bear to sustain his or her government because the government has certain functions to perform for those it governs. A précised definition of taxation by farayola (1987) is taxation is one of the sources of income for government, such income as used to finance or run public utilities and perform other social responsibilities.
Ochiogu (1994) defines tax as a levy imposed by the government against the income, profit is the most important sources of revenue for modern governments, typically accounting for ninety percent or more of their income. Taxation is seen by Aguolu (2004), as a compulsory levy by the government through its agencies on the income, consumption and capital of its subjects. These levies are made on personal income, such as salaries, business profits, interests, dividends, discounts and royalties. It is also levied against company’s profits petroleum profits, capital gains and capital transfer. Whereas, Ojo (2008) stresses that, taxation is a concept and the science of imposing tax on citizens. According to him, tax is itself a compulsory levy which is required to be paid by every citizen. It is generally considered as a civic duty. The imposition of taxation is expected to yield income which should be utilized in the provision of amenities, both social and security and creates conditions for the economic wellbeing of the society.
Okon (1997) states that income tax can be regarded as a tool of fiscal policy used by government all over the world to influence positively or negatively particular type of economic activities in order to achieve desired objectives. The primary economic goals of developing countries are to increase the rate of economic growth and hence per capita income, which leads to a higher standard of living. Progressive tax rate can be employed to achieve equitable distribution of resources. Government can also increase or decrease the rate of tax, increase or decrease the rate of capital allowance (given in lieu of depreciation) to encourage or discourage certain industries (e.g. in the area of agriculture, manufacturing or construction) or may give tax holidays to pioneer companies. Income tax therefore can be used as an agent of social change if employed as a creative force in economic planning and development.
Taxation has been in existence in Nigeria before the advent of the British rule in 1861: particularly in the north where there was an efficient and stable administration based on Islamic system (Abdulrazaq, 1993),
There were various forms of taxes in the northern Nigeria in 1861, such as the ‘’zakat†(a tax levied on Muslims for charitable, religious and educational purposes). ‘‘KurdinKasa’’ (an agricultural tax) and ‘‘Jangil’’ (a cattle tax levied on livestock). In the south western area, there were various forms of taxes such as ‘‘Isakole’’ (tax levied on land used by local communities who are normally expected to pay tribute ‘‘tax’’ to the local chief), ‘‘Owo-ori’’ (tax paid by every individual in the community to the government).
The Eastern Area of Nigeria is said to be premised on the republican nature of the Igbos.
The following are some of the form of taxes in this area ‘‘egbu-nkwu’’ (tax imposed before palm oil is harvested, it is compulsory and there can be no harvest without it), community effort (tax on members of each community for specific purpose, it is also applicable in the western area of Nigeria). It is possible for those who are unable to physically take part in the community work to pay their levies in cowry (form of cash), food as well as palm wine.
During the pre-colonial era, taxation functioned more or less on an ethnic basis with a centralized authority, administrative machinery and judicial institutions such as Northern areas where we have ‘‘Emirs’’, Yoruba and Benin kingdom where we have the ‘‘Obas’’. In the non-chieftaincies areas like the Igbo, Tiv, Bura, Igbira, and Bachama area, there exits little or no form of organized taxation (Abdulrazaq, 1993). It should be noted however, that taxes were not necessarily paid in money during this period, they were mostly paid in money during this period, they were mostly paid in kind and obligatory personal services otherwise known as ‘‘tribute taxes’’
The creation of the colony of Lagos in 1862 brought about the English law, therefore the income tax as we have it today was first introduced in Nigeria by the British through Lord Lugard in 1904 (due 1962) as cited in Abdulrazaq, 1993, to raise additional revenue, Lord Lugard took steps to institute a uniform tax structure patterned on the traditional system that he had adopted in the North during his tenure there. Taxes, therefore, became a source of discontent in the south and in effect contributed to disturbances protesting British policy.
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ABSRACT - [ Total Page(s): 1 ]ABSTRACTSmall and Medium Enterprises play a very important role in development of the Nigerian Economy. Making up about 97% of the entire economy, they serve as a source of employment generation, innovation, competition, economic dynamism which ultimately lead to poverty alleviation and national growth. Tax policy is one of the factors that constitute the Small businesses’ economic environment. This research work tries to establish if any relationship exists between the growth of Small bu ... Continue reading---
QUESTIONNAIRE - [ Total Page(s): 3 ]QUESTIONNAIRETHE IMPACT OF TAXATION ON THE OPERATION OF SMALL AND MEDIUM SCALE BUSINESS (A CASE STUDY OF SMEs IN ABEOKUTA METROPOLOIS)COLLEGE OF HUMANITIES MANAGEMENT AND SOCIAL SCIENCESDEPARTMENT OF BUSINESS AND ENTREPRENEURSHIPKWARA STATE UNIVERSITY, MALETE.Dear Sir/Ma, This questionnaire is designed to acquire information on the effect of entrepreneurial characteristics on business performance in Nigeria. In order to enable me carry out this research work. All information collecte ... Continue reading---
TABLE OF CONTENTS - [ Total Page(s): 2 ]TABLE OF CONTENTSContentsCERTIFICATION DECLARATION DEDICATION ACKNOWLEDGEMENTS TABLE OF CONTENTS LIST OF TABLES ABSTRACT CHAPTER ONE INTRODUCTION 1.1Background of the Study 1.2 Statement of Research Problem 1.3 Research Aim and Objectives 1.4 Research Questions 1.5 Research Hypotheses 1.6 Significance of the Study 1.7 Limitation of the Study 1.8 Scope of the Study 1.9 Outline of Chapters 1.10 Operationalization 1.11 Defini ... Continue reading---
CHAPTER ONE - [ Total Page(s): 4 ]Taxation can help small business to get a high profit target bearing in mind that they will pay tax from the profits they make. From the above assertion, it is obvious that taxation has some impact on the establishment of small business. In the economy, there are manipulations of taxation rules for the encouragement of small business. This research work is an attempt to Enquirer whether a high incidence of corporate tax will go a long way to reducing the number of small business establishments w ... Continue reading---
CHAPTER THREE - [ Total Page(s): 3 ]Hence, the sample size for this study is 109 3.7.2 SAMPLING TECHNIQUES According to Abosede (2010) sampling techniques are approaches used in selecting samples from a study population. Given the large scale of SMEs in Abeokuta metropolis, the judgmental sampling procedure and non-random sampling technique will be used because it will not guarantee randomness, that is, elements of the population do not have the opportunity of being given an equal chance of selection. 3.7.3 SAMPLE FRAMEThe rese ... Continue reading---
CHAPTER FOUR - [ Total Page(s): 14 ]The F-Test (ANOVA)This is used to test the overall statically significant of the variables. It is meant to test the overall significance of the entire model as regards the dependent variable. It checks the joint variance of the explanatory variables. The level of significance to be used is 5%. Hence, if the probability is ≤ 0.05, the explanatory variables’ parameter estimates will be jointly statistically significant.The correlation between productivity and progressive tax is 0.71 w ... Continue reading---
CHAPTER FIVE - [ Total Page(s): 2 ]CHAPTER FIVESUMMARY, CONCLUSION AND RECCOMENDATIONS5.0 Introduction This chapter of this research work gives an overview of the entire research work. It starts with the summary of the work from the first chapter to the last chapter. The findings were looked at from the theoretical and the empirical point of view, conclusions were also made on all the content and contexts already discussed, after which recommendations were proffered as a means of setting benchmark and target for f ... Continue reading---
REFRENCES - [ Total Page(s): 2 ]REFRENCES• 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• 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 ... Continue reading---
