Abstract

Taxation plays an imperative role in the growth of every economy as well as the growth of Small and Medium Enterprises (SMEs). In less developing nations like Cameroon, the role of SMEs is vital in pushing the socioeconomic advancement agenda of the country further.

This study seeks to find to examine the effect of multiple taxes on the growth of SMEs in the Buea municipality. Specific objectives of study were to determine the effect of Business license tax on growth of small and medium scale enterprises in the Buea municipality, to investigate the extent to which global tax affect the growth of small and medium scale enterprises in the Buea municipality. to ascertain the effect of hygiene and sanitation tax on the growth of small and medium small enterprises in the Buea municipality.

This study employed survey research design; the population of this study includes 80 SMEs in the buea municipality, primary source was employed for data collection, Purposive and convenient sampling procedure was used to select 80 SMEs within the Buea municipality.

This study also makes use of questionnaires as instrument for data collection. Collected data from the field was subjected to analysis using SPSS version 21.0, frequency and percentage distribution of variables were obtained and presented using tables and chats.

The study found that business license tax has a significant level of 0.911 (P=0.000), furthermore, the study also revealed that global tax has a significance level of -0.063 (P=0.803). this study further concluded that, obtaining a business license positively impacts the growth of SMEs in Buea Municipality, also this concludes that hygiene and sanitation tax have a positive effect on the growth of Small and Medium-Sized Enterprises in Buea Municipality.

This study recommends that Buea Municipality should focus on improving the process of obtaining business license tax by streamlining procedures, reducing paperwork, implementing online registration systems, and providing efficient customer service. By facilitating this process, SMEs will have a better chance of growing and contributing to the local economy.

CHAPTER ONE

INTRODUCTION

1.1 Background to the study

Small and medium enterprises (SMEs) are considered the backbone of economic growth in all countries. Smaller enterprises represent over 90% of private businesses and they contribute to more than 50% of employment and GDP in most African countries (UNIDO, 2009). Small and Medium Enterprises have always been considered an important force for economic development and industrialization in smaller economies (Aryeetey & Ohene, 2004 and Oludele & Emilie, 2012).

These small enterprises have increasingly been recognized as enterprises that contribute considerably to the creation of jobs, economic growth and eradication of poverty in Africa. According to the 2005 World Development Report, the creating of “sustainable” jobs and opportunities for smaller entrepreneurs are the key strategies to take people out of poverty.

In recent times the world economy has develop   tremendously and this has been linked with the activities carried out by small and medium size enterprises. A study carried out by the ministry of small and medium size enterprises in Cameroon makes up to 97% of productive unit of the economy (Ariyo, 2005)

The word tax is derived from the Latin   word TAXARE which means to assess. Before that English used the related word, task derived from old French. For a while task and tax were both in common use the first requiring labour second money. Small and medium size enterprises since the 1960s till date have been given due recognition especially in the develop areas for playing a very important role towards fostering economic growth.

These businesses (restaurants, pharmacy shop, documentation offices, telephone booth, computer service, provision store) play a very big role in employing, providing good and services, increasing leaving standard as well contributing to the gross domestic product of many countries all over the world. For example, countries like Britain, USA, France, small and medium size enterprises contribute greatly to the GDP of these countries,50-52% ,50-52%,55-62%, respectively to the total gross value added of their various countries (vitally 2003). This means that over 55-65% of government revenue is generated from small and medium size enterprises. The stunted growth of the economy has often been blame on many factors, top of which is the challenge of uncoordinated tax administration that has cripple production capacity of the SMEs (Yitzhaki, 2006), one of the biggest problems to the growth of SMEs is the issue of TAXATION. Taxes have been a major problem to investors, and scares away prospective ones. Cameroon as a developing country has experience economic growth because of the presence of small and medium size enterprises that has help to create jobs, increase leaving standard and also help reduce poverty.

It is for this reason that the government of Cameroon has taken upon himself   to encourage the growth of SMEs by instilling confidence in the population through reorganizing and regulating the activities of small and medium size enterprises. Small and medium size enterprise constitute an enormous proportion of the business sector in Cameroon and Buea in particular.

This SMEs pay taxes be it direct or indirect taxes. Taxation is simply the process of collecting from people or cooperation money for purpose of administration and development of the society. According to Whendel Holmes, taxation is a price we pay for living in a civilized society. It can be looked at as an income redistribution policy by the government. Thus, the payment of taxes by natural and artificial persons is very important for the smooth functioning of government. Taxation is unlike extraction because it is not arbitrary. We can see that does who pay taxes have clear expectations about consistency of its application.

Cameroon operates a self-declarative tax system, that is companies and individual takes the initiative, which help reduces their cost administration of taxes. Tax payers in Cameroon over the year assess their income, declare and pay their taxes. This means that a tax payer should be able to know the taxes he is to pay, when to pay, how to pay, where to pay and declare the tax. In Cameroon, the government imposes several types of taxes for purposes of protecting and controlling the operations of small and medium size enterprises, as well as protecting other infant industries and also ensures fair competition among SMEs.

Small and Medium size enterprises in Cameroon suffer because of high taxes that discourage their growth (Oludele and Emilie, 20120) From the economist point of view, multiple taxes increase production, cost of goods and services. Also, if the tax structure is not adequately designed to the specific environmental conditions, it may create a greater burden to the taxpaying organisations. Therefore, it is the duty of the state to ensure that all citizens respect their obligations by paying taxes that is both the individuals, large enterprises and small and medium size enterprises (Baurer, 2005)

After all the contributions that taxation can make towards the GDP of a country in general, it is also important for the government of that country to pay attention to the effects of these taxes on those paying the taxes, especially small businesses. It has been observed that less attention has been given to the site effects of taxes on small and medium size enterprises. This study will examine the effect of taxation on these small and medium size enterprises.

1.2 Problem Statement.

Multiple taxes and the growth of SMEs in Cameroon has been a call for concern, Although there was 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 Cameroon; inadequate capital, poor technical and managerial skills, environmental effects and the government regulations which is most affecting the operation of SMEs in Cameroon especially this issue of multiple taxation which is a worm eating deeply and the large chunk 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 (SMEs).

SMEs and taxes are not mutually exclusive by any means. Yet it has been noted in precious studies (Tomlin 2008) that SMEs sacrifice funds to pay taxes, which could otherwise be invested in the business growth. The main problem of this study is that taxes is seen as a hindrance to the growth of small and medium size enterprises. This is so because it is believed that tax rates charges on SMEs in Cameroon are not accurate since they are based on assumptions, without assessing the actual turnover of the enterprises.  No or little work has been carried out in the case of Cameroon to fill this gap and this has cut the attention of this researcher to carry out a study on the effect of multiple taxes on the growth of SMEs in the Buea.

1.3 Research Question 

1.3.1 Main Research Question

The main research question is, what is the effect of multiple taxes on the growth of small and medium size enterprises in the Buea municipality.

1.3.2 Specific Research Questions 

1. What effect does Business license tax have on growth of small and medium scale enterprises in Buea municipality?
2. To what extent does Global tax affect the growth of small and medium scale enterprises in Buea municipality?
3. What effect does hygiene and sanitation tax have on the growth of small and medium small enterprises in Buea municipality?

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