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This research study was aimed at examining the impact of taxation on the growth of small and medium size enterprises in the municipality of Buea. The research study had as specific objectives: To find out the impact of global tax regime (patent) on the growth of small and medium size enterprises in the municipality of Buea and to find out the effect of business license on growth of small and medium size enterprises in the municipality of Buea. The survey method was used wherein 30 SMEs in Buea where surveyed.

Data was obtained through a structured questionnaire designed for that purpose and the data was analysed using the linear regression analysis with the help of Statistical Package for Social Sciences (SPSS). Empirical literature on global tax regime and business license of taxation was the bases for this research work.

With the main objective of determining the impact of taxation on the growth of small and medium size enterprises and hypothesis of H01: Global Tax does not significantly affect the growth of SMEs and H02: Business license does not significantly affects the growth of SMEs. The hypothesis was tested through a correlation test, and it revealed that there is a strong positive relationship between the variables (r=0. 717).

The study concluded thus that taxation (global tax and business license) has a significant impact on the growth of SMEs. The study recommended that tax collection authorities should make taxpayers understand the need to pay taxes and such revenue collected should be used to improve the business environment for these businesses so that they shall see the need to pay and comply with taxation procedures.

KEYWORDS: Taxation, Global tax, Business License, Growth


1.1 Background of the Study
Economic growth in every country is defined by the performance and growth of its production sector. Small and medium size Enterprises (SMEs) forms the core of majority of the world’s economies including Cameroon therefore their growth is very important. A study carried out by the Federal Office of Statistics shows that in Nigeria, small and medium enterprises make up 97% 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. Panitchpakdi (2006) sees SMEs as a source of employment, competition, economic dynamism, and innovation which stimulate the entrepreneurial spirit and the diffusion of skills. Because they enjoy a wider geographical presence than big companies, SMEs also contribute to better income distribution.
Small and medium enterprises play a very important role in development of the Cameroon economy. The SMEs sector’s importance in the economic development of any country in recent years cannot be underrated especially with regard to creation of employment, innovation, uplifting the people’s standard of living and financial contribution to the growth of the country’s GDP. This sector’s growth is hindered by the challenges of lack of financial resources to expand, the entrepreneur managerial skills, unskilled labor, production of poor quality goods, lack of market for their products, infrastructure and above all taxation policy which does not favor their growth potential.

In most countries, tax policy is one prominent area where the legislator explicitly reserves special treatment to Small and Medium sized Enterprises (SMEs) (Roche, 2015; Vavryshchuk, 2003). In the face of a rather daunting array of issues that one encounters when thinking about SMEs, it opts for abroad, but still limited approach. Small and Medium Enterprises have always been considered as an important force for economic development and industrialization in smaller economies (McIntyre, 2001). There is a growing consensus that small enterprises contribute considerably to the creation of jobs, economic growth and eradication of poverty in Africa (Handley, Higgins, Sharma, Bird, & Commack, 2009; North & Small bone, 1995).

According to the 2005 World Development Report, the creating of “sustainable” jobs and opportunities for smaller entrepreneurs is among the key strategies to take people out of poverty. Small and Medium Enterprises are mostly private enterprises and they face difficulties when dealing with the government in general and the tax administration in particular mostly the developing countries. The study seeks to explore the impact of tax influence on SMEs sector growth in Buea Municipality. This chapter highlights the main reasons for the study. It also gives the background information, statement of the problem, objectives of research, research questions, hypothesis of the study, scope of the study, significance of the study, scope of the study.
While in the developed countries Small and Medium Enterprises (SMEs) play an important role in many sectors of the economy, in Less Developed Countries (LDC) such as Cameroon, they constitute the fabric on which social and economic stability depends upon (Nuwagaba, 2015).

In these countries, SMEs constitute more than 90 percent of all firms and hence play an important role in economic development, job creation and poverty reduction (The World Bank, 2010).
The SMEs sector is broadly characterized by the activity of enterprises engaged in the production of goods and services with the primary objective of generating employment and income to persons concerned. Further, the SMEs are concentrated in the traditional economic sectors recognizable by their use of low technology, reliance largely on social networks and inter-firm cooperation, and orientation towards the local and less affluent segments of the market. Most SMEs–especially the micro-sized ones has the characteristics of household enterprises. They are operated mostly by a single person with or without the help of family members, and usually not licensed with a government agency (Asare, Akuffobea, Quaye, & Atta-Antwi, 2015).

Their business activities are largely in trading, and simple manufacturing and only a small portion are engaged in service related businesses. The range of activities is usually in the production of consumer goods and their manufactured products include textile products, carpentry & other wood products, light engineering and metal fabrication, food processing, leather products, handicrafts and ceramics. The services sector tends to be dominated by restaurants and food preparation, hair salons and barbershops, passenger and goods transport, building construction, telecommunication services, business centre services and cleaning services.

Most SMEs involved in trading tend to concentrate on consumable products, industrial products, and agricultural inputs and produce.
The desire to build a civilized country with a strong and sound economy is the desire of every country, including Cameroon. Tax payment is the demonstration of such desire, although some income earners see it as a means of exploitation by the government. Tax payment is a voluntarily contribution imposed by the government on personal income earners, companies, investors, exporters, importers etc. Revenue realized from taxation is a major source of revenue to the government of Cameroon, and as such is important tool used in development of Cameroon and her economy. A country’s tax policies and systems are greatly related with the business ventures in the country.

An economy that enacts favorable and progressive tax laws and policies will definitely breed successful and finance healthy business organizations. Once business flourish, the economy flourishes as well, as there is no quicker way of stirring up the matters of economy without help of organizations that move services, goods, money and investments from those with surplus to those with deficit; those with marketable ideas/ output to those who need these ideas and products. In essence, businesses and tax policies greatly depend on one another for survival. If one is greatly affected the other follows suit. The Cameroon tax system has undergone significant changes in recent times.

With the help of various studies and research done by tax experts, tax laws are being reviewed with the aim of repelling obsolete provisions and simplifying the main ones. Under current Cameroon laws, taxation is enforced by two tiers of the government, that’s National government and county government with each having its sphere clearly spelt out in taxes and levies. Small business enterprises are generally recognized as important drivers of economic success. They are key ingredient in the „ecology of firms‟ in healthy economy, as job creators, sales generators and source of tax/ fiscal revenue. In Cameroon the importance of small business enterprises as a creator of jobs, particularly for those with low skills level, is widely recognized.

SMEs contribute 25% of the country’s gross domestic product (GDP) and employ about 60% of the workforce in the private sector. In agriculture, construction and retail sector SMEs employ more than 75% of the total workforce. Over the last few years the growth of SMEs employment has exceeded the growth in their contribution to the GDP the reason why the Cameroon government has been notably supporting them through financial institutions credit lending. Regulations and tax policies are reported to be one of the constraints to the expansion of small businesses in Cameroon and internationally.

However, these enterprises like any other business Cameroon are liable to different types of taxes and these include income tax, corporation tax capital gain tax, sales tax and customs duties that are paid at different stages of the business. For purposes of this study the emphasis is put on income tax which is levied on the incomes of all Cameroon residents.

1.2 Statement of the Problem


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