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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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2.1.6 WAYS OF ADDRESING THE CHALLENGES TO REDUCE TAX BURDEN FOR SMALL BUSINESSES AS WELL AS INCREASING GOVERNMENT REVENUE
A report by Oboh (2002) explains that in order for the government of Nigeria to be able to properly collect taxes from the citizens and residents of Nigeria, the government must educate the masses about the need for the taxes. The average person must be made to understand that the government cannot develop the country and undertake all the projects the citizens’ demand without money. For example, Nigerians complain that the roads are bad, the schools, hospitals, and market places are in dilapidated condition, not enough teachers, etc. These services and infrastructure improvements, etc could not be undertaken without money in the form of taxes from the people. We cannot expect only the civil servants and a few others in the country to pay taxes. Many self-employed people in Nigeria pay little or no taxes, yet, they all demand services, one way or the other from the government. The way to make every self-employed person pay taxes is to issue tax identification numbers to each entity and ensure that their businesses, small or large, are registered with the IRS. Better still, the tax ID could also be issued when the business is registered. Those whose businesses are not registered should be charged with noncompliance and hauled to court. The laws on the books must be vigorously enforced.
Second, the government must build a data base to collect information on who is a Nigerian or resident of Nigeria, where, he/she lives, what job the person does, how much (estimate) the person makes in a year, etc. The present system of using post office box numbers to deliver letters especially to individuals is totally unacceptable and must be changed. Internal revenue service agents cannot be sent to a post office box (P. O. Box number) to collect taxes or discuss tax matters or arrest people for nonpayment of taxes. The way taxes are collected in Nigeria is archaic and primitive. If someone sells for example at Makola market, issuing the person a ticket in the form of a fee to enter the market to sell goods and services everyday allows the individual to evade taxes. For example, the person can decide to sell from home at any time without coming to the market or can sell from the road side. The seller can even enter the market when the revenue agents are not at the gate. The point is this: People should be taxed based on their total income and not only on their activities which the authorities presently know about. Nigeria should adopt a broader definition of income. The government should tax a person or an entity on any income which it knows about as well as other income it does not know about. Specifically, this means that if a person is a clerk and also a trader, the person must declare his/her total income as earnings from working as a clerk and earning from his/her trade. This is how the US government has been able to prosecute and jail gangsters and members of the mafia and organized crime for tax evasion. Al Capone, the mafia kingpin was nailed and sent to prison at Alcatraz for tax evasion in the 1930's.
Third, the present system in Nigeria whereby revenue agents walk around to collect taxes in cash is a sure way for agents to cheat the system and steal from the people by issuing false tax receipts. It is not a good system of internal controls for record keeping and accountability purposes. The government must open revenue offices throughout the country or set up relations with local banks to make it easier for people to pay their assessed taxes. It should be made clear to all Nigerians that it is their responsibility to go to the tax office to pay their taxes and that the government would use whatever powers it has within the law to collect all delinquent taxes including prosecution and jail time for tax evasion. There is a lot of joking and playing around in Nigeria when it comes to economic development. Nigerians expect manna from the government but don't want to pay for it. No country on this earth is ever developed without an adequate tax base to fund programs. The government should work closely with the opposition parties in formulating a progressive tax policy so that the question of taxation does not become a political issue. Civil society, churches, business associations including the chamber of commerce, etc, must all be informed about the need to educate their members on the importance of paying their personal and corporate taxes. Without adequate tax payments from the people and residents of Nigeria, not enough revenue could be generated for development to promote and maintain sustainable economic growth in the long run (Okpara, 2000)
2.2THEORETICAL FRAMEWORK
2.2.1 THEORIES OF TAXATION
The economists have put forward many theories or principles of taxation at different times to guide the state as to how justice or equity in taxation can be achieved. The main theories of taxation in brief are;
• Benefit Theory;
Benefit Theory developed by Erik Lindahl, According to this theory, the state should levy taxes on individuals according to the benefit conferred on them. The more benefits a person derives from the activities of the state, the more he should pay to the government. This principle has been subjected to severe criticism on the following grounds:
Firstly, If the state maintains a certain connection between the benefits conferred and the benefits derived. It will be against the basic principle of the tax. A tax, as we know, is compulsory contribution made to the public authorities to meet the expenses of the government and the provisions of general benefit. There is no direct quid pro quo in the case of a tax.
Secondly, most of the expenditure incurred by the slate is for the general benefit of its citizens, It is not possible to estimate the benefit enjoyed by a particular individual every year.
Thirdly, if we apply this principle in practice, then the poor will have to pay the heaviest taxes, because they benefit more from the services of the state. If we get more from the poor by way of taxes, it is against the principle of justice? (Wikipedia.org).
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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---
