TABLE OF CONTENTS
Abstract - - - - - - - - - -
Table of Contents - - - - - - - - vi
List of Tables
Background to the Study - - - - - 1
of Problem - - - - - - 8
of the Study - - - - - - - 15
of the Study - - - - - - 14
of the study - - - - - - - 16
of Terms - - - - - - - 16
of the Study - - - - - 18
CHAPTER TWO: LITERATURE REVIEW
1. 2.1 Theoretical Issues
2. 2.1.1 Overview
Tax Policy in Nigeria
Relevance of Small Scale Enterprises
to the Development of the Economy
Effects of Taxes on Small Scale
Challenges of Small Scale Enterprises
Theories of Taxation
The Cost of Service Theory
Ability To Pay Theory
Summary Of Literature Review
CHAPTER THREE: RESEARCH METHODOLOGY
3.1 Research Design - - - - - - - 85
3.2 sources of data collection and justification - - -
3.3 Scope and limitations of the study - - - - - -3.4 Research hypotheses - - - - 93
3.5 population and area of the study - - - - 97
Sampling technique and sampling size
CHAPTER FOUR: PRESENTATION AND
ANALYSIS OF DATA
4.1 Data presentation - - - - - - 98
4.2 Test of hypotheses- - - - - - - 100
4.3 Discussion of Findings - - - - - - 108
CHAPTER FIVE: SUMMARY, RECOMMENDATIONS
5.1 Summary - - - - - - - - - 112
5.2 Policy Recommendations - - - - - - 113
5.3 Conclusion - - - - - - - - 116
References - - - - - - - - 118
LIST OF TABLES
1: distributed and returned
questionnaires -- -- 55
2: Distribution of Respondents by gender 60
3: Distribution of Respondents by marital
status-- -- -- 60
4: Distribution of respondents by
academic qualification -- -- 61
5: Distribution of respondents by
category of business 62
6: Distribution of respondents by legal status 62
7: Distribution of respondents by number
of workers employed -- 63
Table 8:Distribution of respondents by
source of capital-- 64
9: Distribution of respondents by tier of government interference
10: Distribution of respondents by level of government interference
11: Distribution of respondents by most disruptive interference
12: Do you pay tax?
4.13: Is the tax rate constant?
4.14: Does the tax rate affect your business expansion?
4.15: Does the tax rate affect your profit level?
4.16: does the tax rate affect your turnover?
research work is centered on the impact of taxation on small and medium scale
enterprises in Cross River State. The study adopted the Chi-square estimation
technique to gather and analyze people’s responses on the issue of taxation.
The results obtained showed that high tax rate affects the expansion of small
scale enterprises in Cross River State. Further investigation of the study
revealed that high tax rate significantly affects the profits and sales
turnover of small scale enterprises in Cross River State. The study therefore
recommended that there is need for government to prone its insatiable demand
for revenue by granting upcoming enterprises tax holidays or concessions in
order to help them save and plough back profits for more expansion.
1.1 Background of the Study
The development of small scale business
enterprises is greatly affected by the level of taxation, its administration
and compliance; The higher the task risk of the greater the efforts to fulfill taxation requirement
as well as to check how those requirements are met, the lower the initiatives
for small scale businesses to work hard. Thus, maintaining the tricky balance
between tax rate, compliance cost, tax administration and economic growth
should be a major goal of every tax policy.
The relationship between taxation and the
level of growth of small scale enterprises has been a debatable issue over the
years. The perceived relationship can be either positive or negative depending
on the type of tax policy adopted by the government. However, it is generally
agreed that high task rate can lead to decrease in business activities since it
dampens the incentives to invest while low tax rate, on the other hand, tends
to increase growth of business activities as profits are increased which lead
to further investment as well a expansion of business. A high marginal tax rate
lowers an investor’s willingness to invest by lowering the returns on his
investment (palacio and Harischandra, 2008). In the same vein, a reduced amount
of business activities has a number of negative consequences including
decreased productivity of workers and reduced output, employment and
ultimately, living standard of the people.
The flow of investment expenditure at any
time depends on the comparisons operators do between the potential benefit and
the cost of making that investment (Ndebbio, 2007). Tax on the other hand is
more of less and appropriation of the realized benefits of investors or
business operators. The consequence of this appropriation is a reduction in
business profit (Bassey, 2005). Business operators operating at any point in
the time are usually guided by their propensity to maximize the contribution to
valve creation (Ndebbio, 2007). To this effect, business are not always made
where they obtain the highest pre-tax return, rather, they are interested in
operating where they obtain the highest post-tax return which is the income
they take home or retain (Cappelea, 2001).
Small scale business or enterprise is of
crucial importance in a developing economy as it helps to bridge and reduce
unemployment gap in such economy. Small scale enterprise is vital to the
economic growth of Cross River State as it constitutes nearly 90% of the
The government of Cross River State in an
attempt to widen the tax base and collect more revenues has had to levy several
taxes especially on business enterprises in the state and this has resulted to
a slow pace of the growth of small scale enterprises as high tax rate has a
major adverse effect on business decision making through covering the profit of
a firm thereby reducing the amount of after tax profit meant for re-investment
and expansion. Thus, it is a greater worthiness that the researcher is studying
the impact of taxation on small scale enterprises in Cross River State.
1.2 Statement of Problem
There is a sweeping and effective revenue
mobilization drive in Cross River State, most of which are carried out by
contracted agencies that sometimes come up with various taxes and levies and impose
them on business operators in the state. This numerous taxes and levies have
been dwindling business fortunes of most operators with lots of consequences
which include cost of unemployment, slowing down of economic activities in the
state and even loss of revenue by the state due to the fact that the taxes are
not optimal and hence when business shot down, they will no longer be there to
pay any tax at all.
1.3 Objectives of the Study
The main objective of this research is to
ascertain the impact of taxation on small scale enterprises in Cross River
State. The specific objectives include:
To ascertain the extent high tax rate has
affected the growth of small scale business enterprises in Cross River State.
To determine how tax rate has affected the profits
and sales turnover of small scale enterprises in the state.
1.4 Significance of the Study
This study will benefit investors, policy
makers and academicians.
For investors, the study will create
awareness on the procedure of starting business in Cross River State and
various charges and taxes levied by the state government.
For policy makers, the study will reveal
the effect of their fiscal policy specifically taxation on macro-economic
variables in the state.
For academicians, the study will add to the
existing stock on study of small scale enterprise and taxation.
1.5 Scope of the Study
This research work is on the impact of
taxation on small scale business enterprises in Cross River State. The research
look at how the enormous taxes levied on small scale business operators in the
state affect the growth of the small scale industry.
1.6 Definition of Terms
is a compulsory financial charge or other levy upon and individual or legal
entity by a state or the functional equivalent of the state such that failure
to pay is punishable by law. It is not a voluntary contribution, payment or
donation but rather, it is imposed by government under t6hthe name of import
duty, exercise, etc.
Taxes are most often levied as a percentage. Thus, tax rate is the percentage
of income or profit of individual paid as tax.
Tax burden or tax base:
otherwise called tax incidence is on whom a tax is collected. Depending on the
elasticity of product, a tax imposed on a seller can be ultimately paid by the
buyer simply by shifting the burden in form of a higher price.
Small scale enterprise:
This is sometime called small scale business. It is a business that employs
small number of workers and does not have a very high volume of sales.
Cross River State:
This is a state located in the southern part of Nigeria, one of Nigeria’s 36
states. The state is bounded by Akwa Ibom, Cameroun, Benue State and Ebonyi
state with an estimated population of about2.5 million people and over 25
ethnically diversed people.
Excess burden of a tax:
In economics, the excess burden of taxation, also known as the deadweight cost
or deadweight loss of tax is one of the economic losses that society suffer as
the result of taxes or subsidies.
1.7 Organization of Study
The study is organized into fiver (5)
chapters. Chapter one is the introduction, chapter two is literature review,
theoretical framework and some conceptual issues. Chapter three looks at the
research methodology while chapter four captures data presentation and analysis
and chapter five is summary and findings; conclusion and policy