Effectiveness of Tax Incentives on Small and Medium Scale Enterprise in Akwa Ibom State, Nigeria
CHAPTER ONE
Objective of the problem
The objectives of the study are;
- To ascertain the tax incentives available to small scale enterprises in Akwa Ibom
- To ascertain the level of taxpayers’ awareness of the existence of these incentives
- To ascertain the effects do tax incentives have on after tax profits of small scale enterprises
- To ascertain the relationship between tax incentives and the growth of small scale enterprises in Akwa Ibom State
CHAPTER TWO
REVIEW OF RELATED LITERATURE
Introduction
Taxes generally are construed as a compulsory or obligatory payment to the government to enable it function. A tax is a financial charge or other levy imposed on an individual or a legal entity by a state or a functional equivalent of a state. Individuals who enjoy tax incentives in Nigeria are individuals and companies, whose income or profit is accruing in, derived from, brought into or receive in Nigeria, Aguolu (1999:137–140). Kohler (1961:41) defined tax as a charge levied by a government unit against the income or wealth of a person or corporate for the common benefit of all.
Although Douglas (1983:40) views taxes as obstacles to economic success, the definition suggested by Rabiu (1981:10-12) explained the context in which taxes should be viewed for the purpose of this research. He defined taxation as the demand made by the government of a country for a compulsory payment of money by the citizens of the country. He further went on to explain that taxation has some main objectives.
The original purpose of taxation is to raise revenue to finance government expenditures. It is also used to influence the economy, for example in providing incentives for production, investments and savings. In attempting to define tax incentives, Elezue (1984:48) argued that any country that wants to develop has to create the right kind of investment climate to attract inventible funds into the industry and tax measures form an integral part of the investment climate.
The Companies Income Tax Act
The law regulating the taxation of companies in Nigeria is the Companies Income Tax Act 1979 as amended. The Act is contained in chapter 60, Laws of the Federation of Nigeria (LFN) 1990 and is amended by subsequent decrees (Acts) including the Finance (Miscellaneous Provisions) of 1993 and other subsequent amendments thereto. The administration of CITA rests on the shoulders of the Federal Board of Inland Revenue which has the following powers and duties:
- It is responsible for the administration of the Companies Income Tax Act and Decree. It assesses and collects the necessary company taxes.
- It can sue and be sued in its official name
- It can acquire, hold or dispose any property held as security and account for the proceeds to the Minister of Finance.
- It may authorize any person within or outside Nigerian to perform or exercise any of its power except those stated under the first schedule to the Act.
- It may (with the consent of the Finance Minister) appoint the joint Tax Board to perform or exercise any of its duties or powers.
CHAPTER THREE
RESEARCH METHODOLOGY
INTRODUCTION
In this chapter, we described the research procedure for this study. A research methodology is a research process adopted or employed to systematically and scientifically present the results of a study to the research audience viz. a vis, the study beneficiaries.
RESEARCH DESIGN
Research designs are perceived to be an overall strategy adopted by the researcher whereby different components of the study are integrated in a logical manner to effectively address a research problem. In this study, the researcher employed the survey research design. This is due to the nature of the study whereby the opinion and views of people are sampled. According to Singleton & Straits, (2009), Survey research can use quantitative research strategies (e.g., using questionnaires with numerically rated items), qualitative research strategies (e.g., using open-ended questions), or both strategies (i.e., mixed methods). As it is often used to describe and explore human behaviour, surveys are therefore frequently used in social and psychological research.
POPULATION OF THE STUDY
According to Udoyen (2019), a study population is a group of elements or individuals as the case may be, who share similar characteristics. These similar features can include location, gender, age, sex or specific interest. The emphasis on study population is that it constitutes of individuals or elements that are homogeneous in description.
This study was carried to examine effectiveness of tax incentives on small and medium scale enterprise. Selected SMEs in Uyo forms the population of the study.
CHAPTER FOUR
DATA PRESENTATION AND ANALYSIS
INTRODUCTION
This chapter presents the analysis of data derived through the questionnaire and key informant interview administered on the respondents in the study area. The analysis and interpretation were derived from the findings of the study. The data analysis depicts the simple frequency and percentage of the respondents as well as interpretation of the information gathered. A total of eighty (80) questionnaires were administered to respondents of which only seventy-seven (77) were returned and validated. This was due to irregular, incomplete and inappropriate responses to some questionnaire. For this study a total of 77 was validated for the analysis.
TEST OF HYPOTHESIS
H0: there is no relationship between tax incentives and the growth of small scale enterprises in Akwa Ibom State
H1: there is relationship between tax incentives and the growth of small scale enterprises in Akwa Ibom State
H0: there are no tax incentives available to small scale enterprises in Akwa Ibom
H2: there are tax incentives available to small scale enterprises in Akwa Ibom
CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATION
Introduction
It is important to ascertain that the objective of this study was to ascertain effectiveness of tax incentive on small and medium scale enterprise in Akwa Ibom state. In the preceding chapter, the relevant data collected for this study were presented, critically analyzed and appropriate interpretation given. In this chapter, certain recommendations made which in the opinion of the researcher will be of benefits in addressing the challenges of effectiveness of tax incentive on small and medium scale enterprise in Akwa Ibom state
Summary
This study was on effectiveness of tax incentive on small and medium scale enterprise in Akwa Ibom state. Three objectives were raised which included: To ascertain the tax incentives available to small scale enterprises in Akwa Ibom, to ascertain the level of taxpayers’ awareness of the existence of these incentives, to ascertain the effects do tax incentives have on after tax profits of small scale enterprises and to ascertain the relationship between tax incentives and the growth of small scale enterprises in Akwa Ibom State. A total of 77 responses were received and validated from the enrolled participants where all respondents were drawn from selected SMEs in Uyo. Hypothesis was tested using Chi-Square statistical tool (SPSS).
Conclusion
On the basis of the discussed findings of this research work, the facts have been clearly confirmed that tax incentives are germane to the growth, development and continued sustenance of small and medium enterprises. Tax incentive plays a vital role in ensuring that small and medium enterprises thrive because the federal government has made available tax holidays for pioneer companies, the government also grants a number of general and industry specific incentives. Finally, for many SMEs, the decision to remain informal is deliberate because of the cost and procedural burden of joining the formal sector out weight the benefit of staying in the informal sector. Informal sectors make large contributions to nation economies, in both human and financial terms. But being visible to government agencies and formal sector companies, they can be easily reached with capacity building improvement schemes but they cannot compete for business with larger companies thus a need for the government to accelerate their growth by creating an enabling environment for them vide appropriate tax incentives when necessary to enhance their sustenance and growth.
Recommendation
There is a need for the government to employ tax holiday as a major tax incentives for newly established small and medium enterprises because it stimulate their investing power thereby exempting them from other tax liabilities.
Government should promote the growth of small and medium enterprises by creating the necessary enabling frameworks and relax the burden of regulating measures and ensure that their efforts are geared towards granting tax incentives to micro, small and medium enterprises.
Building SMEs capacity through the localization of supply chains requires the leadership from the top localizing values creation through engagement with SMEs is a key contribution that large corporations can achieve, this undermine their license to operate by creating a positive local impact, considering partnership across segments, business planning skill, all these put in place goes a long way in ensuring that tax incentives granted to SMES have a significant impact on their growth.
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