AN EXAMINATION OF THE EFFECTS OF MULTIPLE TAXATION ON THE PERFORMANCE OF MEDIUM AND SMALL ENTERPRISES

CHAPTER ONE

INTRODUCTION: Pre-colonial times are when Nigerian taxes first began. prior to the colonization of the many nations that subsequently merged to become Nigeria. In order to support the many kingdoms, ethnic groups, and tribes ruled by the Obas, Emirs, Ezes, Attahs, Ohinoyis, and Amanyanabos, multiple taxing systems existed in the form of mandatory services, contributions of products, money, labor, etc. This concept is shown by the expulsion of King Jaja of Opobo in 1893 as a result of his objection to imperialist taxes. The old tyrants taxed their citizens in one way or another.

These taxes came in the form of "Zakkat," a levy on Muslims for religious, charitable, and educational purposes, and "Kudin-Kasa," an agricultural tax on the use of land (equivalent to present day land ground rent). Shuka-Shuka is a tax assessed on cow ownership depending on the number of cattle; "Ishakole" is a contribution of farm goods used as a type of land tax in return for the use of land for agricultural purposes and paid to obas, chiefs, and family/community leaders. Community taxes are paid by all adults in a community to carry out projects that benefit the community. "Osusu Imachi Nkwu" (taxes for palm fruits) taxes are paid by those who harvest palm fruits and who are expected to contribute. "Owo-Ori" refers to individual taxes that are payable in cash or kind in exchange for services.

Simply said, taxation is the forced transfer of funds from private persons, organizations, or groups to the government. It may be imposed as a sure-charge on prices on wealth or income. Therefore, taxes are a fraction of the output of a nation's land and labor that is made available to the government.

On the other hand, multiple taxation refers to the imposition of many taxes by the government that might have been combined into a single large tax form. Some of the taxes are sometimes referred to as levies. However, in the purpose of this work, any mandatory payments paid to the government by people or organizations are treated as taxes. Taxes often serve as the foundation for government income, which aids in the execution of its duties. For this reason, Ojo (2020) described tax as a method by which the government obtains a portion of the income and expenditures of the private sector as its revenue in order to cover recurring costs and generate public capital creation for the advancement of the products and services of the economy.

Fairness, ease of use, simplicity, low collection costs, and minimal distortions are all characteristics of a good tax. According to Musgrave (2019), taxes should be set to have the least possible impact on otherwise efficient markets' ability to make economic choices. Excessive load should be avoided as much as possible. Once again, a good tax system should allow for effective, non-arbitrary administration and be clear to the taxpayer.

1.1   Background of the Study

The operations of small and medium-sized firms (SMEs), particularly in emerging nations, have been connected to the recent phenomenal growth of the global economy. According to a federal office of statistics analysis, 97% of the Nigerian economy's productive units are small and medium-sized businesses (Ariyo, 2015). Even though they are smaller, they are the most significant businesses in the economy because, when all the individual effects are added up, they outweigh those of the larger corporations. This is because small businesses in Nigeria are widely acknowledged to be important in creating jobs, especially for people with low skill levels. Small, medium, or micro businesses (SMMEs) make up 68.2% of the private sector employment and account for 36.1% of the nation's gross domestic product (GDP). For instance, SMMEs employ more than 80% of the workforce in the agricultural, construction, and retail sectors, with the expansion in their GDP contribution underscoring this sector's capacity to create jobs.

It is impossible to overestimate the benefits of small and medium-sized businesses on both a social and economic level. According to Panitchparkdi (2016), SMEs are a source of employment, competitiveness, economic dynamism, and invention, all of which foster an innovative mindset and the spread of knowledge. Small and medium-sized businesses can manage a piece of land space and can establish the business with less capital than big companies because they have a smaller geographic presence than big companies, for example in terms of the location or site of the business and the cost of establishing the business. Due to their high level of innovation, they encourage the use of our natural resources, which results in increased production and an increase in the wealth of the nation. There is little question that small and medium-sized businesses have improved the level of life for many people, particularly in rural regions (Ariyo, 2015).

However, owing to financial limitations, such as the fact that most of their funding comes from a single source, these tiny businesses have an extremely high mortality rate (the sole proprietor) Additionally, inadequate managerial abilities, a lack of staff training, a lack of rewards, and a lack of employee engagement. 80% of SMEs fail before their fifth anniversary, according to the Small and Medium Scale Enterprises Development Agency of Nigeria (SMEDAN).

1.2   Statement of the Problem

The multiplicity of taxes, including levies rates, imposed by the various tiers of government unit, village, local government area and states etc. impact on their operation. Tax burden is a major problem in Nigeria as many business organizations are not favoured by the tax systems and policies in some place.

Although there is a general perception that tax is an important source of fund for development of the economy and provision of social services, the problems faced are in the area of negative relationship between taxes and the business’ ability to sustain itself and to expand. SMES are faced with the problem of high tax rates, multiple taxation, complex tax regulations and lack of proper enlightenment or education about tax related issues. Not minding other challenges that SMEs are facing in other developing countries like Nigeria; inadequate capital, poor technical and managerial skills, environmental effects and government regulations which is a worm eating deeply and large chuck of revenues generated by these SMEs for their growth and survival. These have led to increase in record of dearth of Small and Medium Scale Enterprise.

1.3   Objectives of the Study

The general objective of this study is to examine the impact of multiple taxation on the achievement of small and medium scale enterprise in Benue State. Specifically, we aim

1. To examine the relationship between multiple taxation and SMEs survival.

2. To ascertain whether the size and ability of SMEs to pay taxes  affect their survival.

1.4  Research Questions

To achieve the objectives of the study, the researcher was guided by the following set of questions;

(i)What is the relationship between multiple taxation and SMEs survival in Benue State?

(ii)Does the size and ability of SMEs to pay tax affect their survival?

1.5 Statement of Hypotheses

The following research hypotheses were developed in order to properly address the problems of the study. These hypotheses were stated in Null form as follows:

1. Ho1: There is no significant relationship between multiple taxation and SMEs’ survival.

2. Ho2: The relationship between SMEs’ size and its ability to pay taxes does not significantly affect their survival.

1.6 Significance Of The Study

This study gives a clear insight into the various ways in which tax policies in Nigeria can be executed efficiently to still favor small businesses and how some taxation policies in Nigeria can be properly tackled. The study also gives a clear insight into the various causes of why small businesses fail in Nigeria as well as the challenges of the tax policies in Nigeria. The findings and recommendations of the researcher will help in building a strong and better tax policy system in Nigeria, if taken seriously by government and the general public. The challenges of taxation in Nigeria are outlined in-order for drastic measures to be taken to tackle these challenges and meet the prospects of the general public so that revenue from tax policy to the government can be increased.

1.7 Scope/Limitation Of The Study

This research focuses mainly on the impact of multiple taxation on the economy and small businesses in Nigeria. The study only torches on the challenges tax policies in Nigeria and how it can affect self employed business men and women, traders, and other forms of sole proprietorship businesses. Its focused on how multiple tax policy affects the performance of SMEs in Benue state Nigeria.

The only limitation faced by the researcher in the course of carrying out this study was the delay in getting data from the various respondents. Most respondents were reluctant in filling questionnaires administered to them due to their busy schedules and nature of their work. The researcher found it difficult to collect responses from the various respondents, and this almost hampered the success of this study.