Abstracts

This study focused on the effects of taxes on the growth of Aningdoh Credit Union (ANNICUL). The main objective was to determine the effect of tax on the growth of ANNICUL and to identify the challenges of the Cameroon tax policy. The data collection method includes the use of questioners.

The analysis of data collected was done in the table for the hypothesis were tested with chi-square method and others in question and answer form without tables. The finding of the scale shows that tax has a negative effect on the ANNICUL.

Their finding proof that Cameroon tax policy those not face many problems and finally, the researcher recommend that the fiscal authority should try and adopt a more efficient tax policy this can be done by trying to register every MFIs. Thereby capturing them in the tax net.

More so better approach that could better access the tax liability should be implemented rather than using the presumptive approach which is a base assumption and may reflect the true tax liability for a period.

CHAPTER ONE

INTRODUCTION

1.1 Background to the Study

This study is on the effect of taxes on the growth of ANNICUL. Over the years, Micro Finance Institutions have been an avenue of job creation and the empowerment of Cameroon citizens, providing about 50% of all jobs also for local capital formation.

However, the mortality or death rates of these micro-firms are very high. Among the factors responsible for these untimely close-ups are tax-related issues, ranging from multiple taxations to enormous tax burdens. The study, therefore, examines the effect of taxation on ANNICUL survival.

The study involves a survey research design with a population of 91. In recent times the world economy has developed tremendously and this has been linked with the activities of Micro Finance Institutions (MFIs), especially in developing countries.

A study carried out by the Federal Office of Statistics shows that in Cameroon, Micro Finance Institutions make up 97% of productive units of the economy (Ariyo, 2005). Although smaller in size, they are the most important enterprises in the economy due to the fact that when all the individual effects are aggregated, they surpass that of the larger companies.

The social and economic advantages of Micro Finance Institutions cannot be overstated as a source of employment, competition, economic dynamism, and innovation which stimulates the entrepreneurial spirit and the diffusion of skills. Because they enjoy a wider geographical presence than big companies, MFIs also contribute to better income distribution.

Over the years, MFIs have been an avenue for job creation and empowerment.  However, the mortality rate of these micro-firms is very high. According to the MFIs Development Agency of Cameroon, 80% of MFIs die before their 5th anniversary.

Among the factors responsible for these untimely close-ups are tax-related issues, ranging from multiple taxations to enormous tax burdens among other issues, etc. In many government policies, microfinance institutions are usually viewed and treated in the same light as large corporations.

However, their size and nature make them unique. Therefore, in dealing with microfinance institutions, these unique qualities need to be considered. In levying of taxes for these enterprises in particular, issues that need to be considered are how these tax policies can be designed to bolster the growth of MFIs and the most effective ways to administer them. The importance of MFIs as a mechanism of economic growth and development is often ignored.

They are perceived as minute establishments that have minimal effect on the state of the economy. However, if favourable environment is created for these MFIs to grow through proper regulation, the MFIs sector has the highest propensity to transform our economy.

In the same light, taxes are important for the government as they are the major source of funds for government expenditure. Income obtained from taxation of individuals and businesses is used to run governments as well as provide infrastructures such as good roads, water supply, and electricity which are essential for the smooth running of these businesses that are mainly manufacturing companies and as such rely on these commodities to survive.

However, Holban (2007) posited that taxation can contribute to development and welfare through three sources;

It must be able to generate sufficient funds for financing public services and social transfers at a high level of quality.

It should offer incentives for more employment and for efficient and lasting use of natural resources.

Finally, it should be able to reallocate income.

But in the case of MFIs, taxes must be imposed in such a way that puts their income and need for survival into consideration. It is expedient that enough profit is allowed for the purpose of expanding their businesses. The tax policy must be one that will not encourage MFIs to remain in the informal sector or to evade or avoid the payment of taxes. More so, many micro-firms in Africa, including Nigeria, choose to remain in the informal sector because the perceived benefits outweigh the perceived costs.

1.2 Statement of the Problem

Although there is a general perception that taxes are an important source of funds for the development of the economy and provision of social services, the problems faced are in the area of a negative relationship between taxes and the business’s ability to sustain itself and to expand.

MFIs are faced with the problem of high rates of taxes, multiple taxations, complex tax regulations, and lack of proper enlightenment or education about taxes-related issues. Not minding other challenges that they are facing in other developing countries like Cameroon; inadequate capital, poor technical and managerial skills, environmental effects, and government regulations which affect the operation of MFIs, in Cameroon especially this issue of multiple taxations which is a worm eating deeply and the large chunk of revenues generated by these MFIs for their growth and survival. These have led to increasing in the record of the death of MFIs. For this reason, was conducted to see the effect of direct and indirect taxes on the growth of ANNICUL.

1.3 Research questions

The research questions will be divided into two parts

1.3.1 Main Question

Do taxes have an effect on the growth of ANNICUL?

1.3.2    Specific Questions

1. What is the effect of direct taxes on the growth of ANNICUL?
2. What is the effect of indirect taxes on the growth of ANNICUL?

1.4 Objectives of the study

1.4.1 Main Objective

The general objective of the study is to examine the effect of taxes on the growth of ANNICUL

1.4.2 Specific Objectives

1. To examine the effect of direct taxes on the growth of ANNICUL
2. To examine the effect of indirect taxes on the growth of ANNICUL

1.5 Research hypothesis

H1: Direct taxes have a negative relation to the growth of ANNICUL

H2: Indirect taxes are negatively correlated to the growth of ANNICUL