In Aba, Abia State, Nigeria. Archives of Business Research

ArchivesofBusinessResearch–Vol.7,No.SPPublicationDate:Mar.25,2019DOI:10.14738/abr73.2.6359.

Agu,G.A.,Onwuka,O.O.,&Aruomah,O.(2019).ImpactOfTaxationOnThePerformanceOfSmallAndMediumEnterprisesInAba,AbiaState,Nigeria.ArchivesofBusinessResearch,7(SP),1-15

ImpactOfTaxationOnThePerformanceOfSmallAndMediumEnterprisesInAba,AbiaState,Nigeria

GodswillAguAgu

DepartmentofMarketing,AbiaStateUniversity,Nigeria

OnwkaOkwaraOnwukaDepartmentofAccounting,

AbiaStateUniversity,Nigeria

ObinwanneAruomahDepartmentofAccounting,AbiaStateUniversity,Nigeria

ABSTRACT

Thisworkaimsatassessing theeffectof taxationon theperformanceofSMEs inAbaAbia State. A survey approach was adopted while the questionnaire was used as aninstrument.Arandomlyselected162employeesandownersof40SMEswereusedforthestudy.Collecteddatawereanalyzedusingthemultipleregressionanalysisandonesamplet-test.Results indicatethatsignificantandpositiverelationshipexistbetweentaxationandtheperformanceofSMEsandthat taxassessment, taxcollectionandtaxutilizationsignificantlyinfluencetheperformanceofSMEsinAba.ItwasrecommendedamongothersthattheNigeriantaxsystemmustseektoprotectandpromotetheSMEsforthemtocontributemeaningfullytoeconomicgrowthandthattheyshouldidentifytheagents responsible for illegal,multiple tax collections that seek to frustrate SMEsanddealwiththemaccordingly.KeyWords:Taxation,Performance,SMEs.

INTRODUCTION

Economicgrowthanddevelopmenthavebecomenearsynonyms to smallandmediumscaleenterprises (SMEs) in countries where adequate level playing ground is provided forentrepreneurs. SMEs have been described as essential agents for delivering more inclusiveglobalizationandgrowth,andkeycontributortoeconomicandsocialwellbeing(OECD,2017).AccordingtotheOECD(20016)report,intheOECDarea,SMEsarethepre-dominantformofenterprise, accounting forapproximately99%of all firms. Theyprovide themain sourceofemployment,accountingforabout70%ofjobsonaverage,andaremajorcontributorstovaluecreation, generating 50% to 60% of value added on average. Corroboratingwith this is IFC(2010) as contained in theOECD (2017) reportwhich asserts that for emerging economies,SMEscontributeupto45%oftotalemploymentand33%ofGDP.AccordingtotheSmallandMedium Enterprises Development Agency of Nigeria (2013) and the National Bureau ofStatistics (2013), there were 37,067,416 (Thirty SevenMillion, Sixty Seven Thousand, FourHundredandSixteen)Micro,SmallandMediumScaleEnterpriseinNigeriaasat2013whichemployedover84%ofthetotallabourforce,andcontributing48.47%totheGrossDomesticProduct(GDP).Today,96%ofbusinessesareSME’scomparedto53%intheUSand65%inEurope (IFC, 2018). This, the International Council for Small Business (ICSB) affirms byassertingthatMSMEsmakeupover90%ofallfirmsandaccountforanaverageof50%GDPofanyeconomy.

Agu,G.A.,Onwuka,O.O.,&Aruomah,O.(2019).ImpactOfTaxationOnThePerformanceOfSmallAndMediumEnterprisesInAba,AbiaState,Nigeria.ArchivesofBusinessResearch,7(SP),1-15.

URL:http://dx.doi.org/10.14738/abr.73.2.6359. 2

GiventheseglobalrecognitionsonthevalueofMSMEsinanyeconomy,Nigeriainclusive,onewonderswhy SMEs inNigeria struggle to survive and achieve these global goals. As rightlyobservedbyBanji (2017), keybuildingblocks for anenablingSMEbusinessenvironment inNigeriainclude:basicscienceandtechnologyknowledgebase,legalandregulatorystructure,basicphysicalandtechnologicalinfrastructureandfinancialincentivestructures.Akeyfactorin the legal/regulatory and financial incentives structures is the tax system on the SMEs.Studies have shown that tax related issues have resulted in untimely exit ofmany SMEs inNigeria.SMEDAN(2015)recordsthat,80%ofSMEsinNigeriadiebeforetheirfifthyearasaresult of challenges faced by start-ups. Ochani and Gamade (2018) observed that multipletaxationandeconomictaxburdenshaveremainedmajorchallengestoSMEs.Infactwhenthetax system on Nigerian SMEs is weighed against the ancient Canons of equity, certainty,economyand convenience as enshrined in theAdamSmith’s “WealthofNations”of1776, itwillbeobviousthatthesystemdoesnotadequatelysupporttheSMEstoplaytheirrole.TheDelloitte Nigeria SMEs report (2018) discloses that theNigerian government tends to focusmore on thewelfare of large corporationswith foreign investments to the detriment of theSMEswhicharewronglyperceivedtohaveinsignificantimpactontheeconomy.OECD,(2017)captures that SMEs have a high propensity to transform an economy if a conduciveenvironmentiscreatedforthemtogrowthroughappropriateregulationandtaxpolicies.TheDelloitte report (2018) states, “In Nigeria, SMEs are subjected to multiple taxes by thedifferent tiers of government, each with its own rigorous process and significantcompliancecost.Consideringthesizeof theiroperations, theabsenceofharmonizedtaxregime increases the strain on cash flow and other limited resources of SMEs whencomparedtolargecorporations’’.TheplightofSMEsinthefaceoftheunfriendlytaxpoliciesbeingexperiencedandtheeffectofthescenarioontheeconomymakethisstudyimperative.Thereistheneedtofindouthowthetax system has affected the financial and non-financial perform indicators of these SMEsjudgingfromperceptionsofthekeyplayersinthefirms.Unlikeextentstudiesthatusedpuresecondarydata,thisstudyisbasedonprimarysourcesinordertoascertaintheperceptions,feelingsandviewsoftheentrepreneurs,ownersoftheSMEsandtheirmanagersonthesubjectmatter.Again,thisstudycomparesbothfinancialandnon-financialperformanceindicatorsofSMEs to ascertain the impactof taxationon them.This ismuchunlikeprevious studies thateitherfocusedonpurefinancialindicatorsornon-financialindicators.TheProblemTaxation isexpectedtocontributesignificantlyandpositively to theperformanceofSMEs inanyeconomy.Thishowever,seemstobelargelyfarfromrealityintheNigerianscenario,theestablishmentofthenewNationalTaxPolicy(NTP)whichseekstocreaterobustandefficienttax system with focus on legislative amendments to reduce tax burden on MSMEs,notwithstanding. An interaction with most entrepreneurs in Nigeria shows a high level ofdispleasurewith the tax system, especially at the state and local government levels. Inmostinstances,thugsareusedtoharassandintimidatebusinessownerstoforcethemtopay,evenin situationswhere it is obvious that such laws (taxes) are illegal andmultiple. The level ofcorruption in the tax assessment, administration and utilization has denied the SMEs thebenefittheyoughttoderiveastaxpayers.TheDelloittereport(2018)hasitthat“…businessesthatmakeprofits areusually subjected tomultiple taxation in their first three years ofcommencementduetotherulesfortaxationofanewbusiness;therebyincreasingtheriskoffailureofSMEswithinthefirstfewyearsofbusiness.Also,exemptionofcompanieswithat least 25% imported equity from minimum tax is discriminatory to Nigerian ownedbusinesses.Morenotably, itdiscourages investmentand increases the riskof failure for

ArchivesofBusinessResearch(ABR) Vol.7,SpecialIssue,Mar-2019

Copyright©SocietyforScienceandEducation,UnitedKingdom 3

companies inperiodsof littleornoprofitability in the caseof SMEs. In the samevein,agood number of SMEs are not able to adequately benefit from tax incentives due to thesmallsizeoftheiroperations’’.Withasubstantialfixedcostcomponenttotaxregulatoryrequirementsandcompliancecosts(recordkeeping,filingandpaymentprocessesetc.)atnational,regionalandmunicipallevels,small businesses are at a disadvantage with respect to large enterprises. For young firms,whichalsotendtobesmall,highcompliancecostscanexacerbatetheresourceandcash-flowconstraintsoftenexperienced in theearly stagesofbusinessdevelopment, andmayact as adeterrent to formalization. In some cases, tax compliance costs for small firms may evenexceedtheirtaxcashpayments(OECD2015c;EichfelderandVaillancourt,2014).Furthermore,certainaspectsofbusinesstaxation,includingasymmetrictreatmentofprofitsandlosses,thedistributionoftaxationbetweencapitalandlabourincomeandthedesignofR&Dtaxcreditsandincentives,canunintentionallydisadvantagesomeyoungandsmallfirms(OECD,2015c).GiventhissituationonedoubtstheabilityofNigeriantaxsystemonSMEstoencouragegreaterinvestments, transition from informal to formal, and impact significantly and positively onemploymentgeneration,salesrevenue,innovativenessandprofitabilityofthefirms.StudyObjectivesThisstudyaimsatassessingthe impactof taxationontheperformanceofSMEsinAba,AbiaState.Thespecificobjectivesare:

1. To know whether significant and positive relationship exists between taxation andSMEsperformance.

2. Toknowwhether the tax assessment system inAba affects theperformanceof SMEssignificantly.

3. To determine whether the tax collection system in Aba significantly affects theperformanceofSMEs.

4. To ascertain whether the tax utilization system in Aba significantly influence theperformanceofSMEs.

ScopeoftheStudyThegeographicalsettingofthisresearchstudyisAbiaStateNigeriawithparticularattentionon SMEs operating in Aba. This study is domiciled in the areas of entrepreneurship andcorporate performance. The units of analysis in the study are owners,managers,marketersand accountants of select firms from the cosmetic, paint, shoes, chemical and clothingsegments. Forty firms were chosen for the study. Abia State and indeed Aba is thicklypopulatedwithMSMEsinthevarioussectorsoftheNigerianeconomy.ConceptofTaxationTaxation is theprimarysourceofgovernmentalrevenue. It is theactof layingatax, i.e., theprocessbywhicha local, state and central government, through its law-makingbody, raisesrevenuetodefraythenecessaryexpensesof thegovernment.AccordingtoAnyanwu(1997),taxationcanbedefinedasthecompulsorytransferorpayment(oroccasionallyofgoodsandservices)fromprivateindividualsorgroupstothegovernment.Agyei(1983)ascitedinEkine(2007),defines it as the transferof resources from theprivate sector to thepublic sector inordertoaccomplishsomeofanation’seconomicandsocialgoals.Thepurposeand importanceof taxation is toraise fundswithwhichtopromotethegeneralwelfare and protection of a nation’s citizens, and to enable it to finance its multifariousactivitiesandtoredistributewealthandmanagementoftheeconomy(Jhingan2004,Bhartia,



2009; Ola (2001) cited in Ogbonna and Ebimobowei,2012). Jhingan (2002) and Anyanwu(1993)pointedoutseveralobjectivesoftaxation,whichincludeto:

i. Put a curb on consumption and thus transfer resources from consumption toinvestment

ii. Raiserevenueforgovernmentiii. Reduceseconomicinequalitiesandiv. Controlincomeandemployment.

ChallengesofTaxSysteminNigeriaTheNigeriataxsystemisbesetbyamyriadofchallenges,someofwhicharehighlightedbelow(FRN i1997, 2002; Ariyo 1997; Ola 2001; Odusola 2002, 2003; study group on tax reform2003): non availability of tax statistics; inability to prioritize tax effort; poor taxadministration;multiplicityoftax;regulatorychallenges;structuralproblemsintheeconomy;corruption;complexityoftaxlaws:TheConceptofSmallandMediumScaleEnterprisesTheNigeriaBank forCommerceand Industry(ascited in Jimah,2011)definedasmall scaleenterprise as one whose capital does not exceed N750,000. The above definition playsemphasisonthecapitalrequirementintheformationofthebusiness.ThoughcapitalisnottheonlyconsiderationindeterminingwhetherabusinessventureisaSMEsornot.Agu (2001) defined SMEs as a businesswhich is owned, led by one or a few persons,withdirectowner(s)influenceindecisionmaking,andhavingarelativelysmallshareofthemarketand relatively low capital requirement. Osazee and Anao (as cited in Inegbenebor, 2006)definedasmallscalebusinessisanybusinessundertaken,owned,managedandcontrolledbynot more than two entrepreneurs, has no more than twenty employees, has no definiteorganizationalstructure(thatis,allemployeesreporttotheowners)andhasarelativelysmallshareof itsmarket. In a similar vein, Inegbenebor (2006)opined that the current industrialpolicyofNigeria,SmallandMediumScaleEnterprises(SMEs)arenowdefinedonthebasisofemployment.Thatis:

i. Micro/cottageindustries 1and10workersii. Small–ScaleIndustries 11and100workersiii. MediumScaleindustries 101and300workersiv. Largescaleindustries 301andabove

THEORETICALFRAMEWORK

Many theories of taxation exist. However, in this study, theBenefit Principle or receivedtheory:Alsocalledverticalequity.RichardandPeggy(1973)notedthatthebenefitapproachwasinitiallydevelopedbytwoeconomistsoftheStockholmSchool;KnutWicksell(1896)andErik Lindahl (1919). Thiswas in a bid to assess the efficiency of taxes and appraising fiscalpolicy.Thus,thetheorystipulatesthatanindividualoughttobetaxedaccordingtothebenefitsreceived fromgovernmentprovisionof goodsand services.This inotherwords, is abenefitcostapproachinwhichtaxisacostandgovernmentamenitiesarethebenefits(Bhartia,2009;Anyanfo,1996).Thistheoryassumesastateofequalitybetweenthemarginaltaxrate(MTR)andmarginal benefit received (MBR) to determine the amount of taxes to be paid (Bhartia,2009).ThisisthebasicphilosophythatoughttoguidetaxationinNigeria.Thisseemstobefar-fetched.



EmpiricalFramework The study of Bosco (2011) aimed at assessing the performance of business enterprises inNtungamoTownCouncil,findingoutiftaxpayersareawareofalltheirtaxobligations,policiesandproblemsaffecting themaswellas theirbusinesses.The findingsrevealed theproblemsfaced by the tax payers as regards mode of assessment, collection and tax collectors,inefficiencyby tax collectors, lossof equipment, lossof sales and lossof stock as a result oftaxes.Adebisi andGbegi’s (2013)examined theeffectofmultiple taxationonSMEs survival.Thestudyinvolvedasurveyresearchdesignwithapopulationof91.Theresearchersderivedtheirsamplesizetoarriveat74andaselfadministeredquestionnairewasusedtocollectdata.These data were quantitatively analyzed with simple percentages and tested the researchhypothesiswithANOVA.FindingsrevealedthatmultipletaxationhasnegativeeffectonSMEs’survivalandtherelationshipbetweenSMEs’sizeanditsabilitytopaytaxesissignificant.WethereforerecommendsthatgovernmentshouldcomeupwithauniformtaxpoliciesthatwillfavourthedevelopmentofSMEsinNigeriaandgovernmentshouldputintoconsiderationthesizeofSMEswhensettingtaxpolicies.The study of Abata (2014) focused on the impact of tax revenue on Nigeria economy.Descriptivesurveydesignwasadoptedandsimplerandomsamplingtechniquewasusedintheselectionofthesamplesize.ThefindingsshowthattaxrevenuesignificantlyimpactonFederalGovernment Budget implementation in Nigeria, Tax administrative system significantlyaffected the revenue generated in Nigeria, Tax evasion significantly affected governmentrevenue inNigeria, and Lack of training on the part of tax officers significantly affected thegenerationofgovernmentrevenueinNigeria. ConceptualFramework:

Basedonthese,wehypothesizedthus:H01:ThereisnosignificantandpositiverelationshipbetweentaxationandSMEsperformanceinAba.

RESEARCHMETHODOLOGYIn this study, the survey researchdesignwasadopted.Thestudypopulation ismadeupofSMEs in Aba Abia State. Records from the Aba Chambers of Commerce show that a goodnumber of the MSMEs are not duly registered members. Thus, the exact population of themanufacturingfirmswasunknown.However,ourinterestison40manufacturingfirmsfrom

Tax Assessment Tax Collection Tax Utilization

Taxation SMEs Performance

Sales Revenue Business Expansion Customer base Growth in Profit Employees



thechemicals,paint, shoesclothingandcosmeticsegments.Hence, thesamplesizewasdrawnfromthemanagement,marketingandaccountingunitsofthefirms.Respondentswerechosenfromeach of the 40 firms. Based on convenience reasons, the firms were selected. The researchersadoptedthenon-probabilitysamplingtechnique,whereunitsofanalysiswereselectedbasedonconvenienceandavailability.Copiesofthequestionnairewereissuedthroughthecompanysecretaries/receptionist to themanagers (owners),marketing executives and accountants ofthe firms, and were retrieved after three working days. Majority of the firms are allocatedwithintheindustrialclustersofOsisiomaandAriaria.TopmanformulaascitedbyOgbuji(2013)wasappliedtoarriveatasamplesizeof162.Thus:

Table1:SectoralDistributionofSampleSizeSNo Sector Number SampleSize

1. Chemicals 6 4*6=242. Paint 4 4*4=16

3. Shoes 22 4*22=884. Clothing 4 4*4=16

5 Cosmetics 4 4*4=16

Total 40 160

Source:Researcher’sComputation,2018.ReliabilityandValidityofInstrumentThelikertscaleondependentandindependentvariablesaresubjectedtoCronbachAlphatestto ascertain the reliability of the instrument. This was done using the responses of the 10respondentswhowere issued the questionnaire on a pilot test. The table below shows theresultoftheCronbachAlphatestandthefactorloading.

Table2: ReliabilityandValidityofInstrumentS/No Variable No.ofItems CronbachAlpha FactorLoading1 Taxassessment 3 0.732 0.7112. Taxcollection 3 0.721 0.6853. Taxutilization 3 0.835 0.6224. Firmperformance 5 0.751 0.756

Source:SPSSOutput,2018.

Theresultshowsthatallthevariablesmettheminimumthresholdforacceptancesincetheyareupto70%(0.70).Basedonthefactorloadings,theinstrumentwasse.Theequationforlinearregressiontakestheform:Y=a+bX+eWhere:a=theYintercept,b=theregressioncoefficientfortheindependentvariableX.Y=thedependent/criterionvariable(firmperformance)X=theindependent/predictorvariables(taxation)thatinfluencethedependentvariable.Thedirecteffectresearchmodelforthisstudyisoftheform:FP=f(T).Where:FPisFirmPerformanceandTisTaxation.



ModelSpecificationsThenecessarymodelsforourregressionanalysisareimplicitlyspecifiedasfollowed:

Firmperformance=f(TA+TC+TU+e)Where:TA=taxassessmentTC=taxcollectionTU=taxutilizationThecomposition,directionandrelativestrengthofeachofthethreeindependentvariablesonthesingledependentvariable(performance)wouldbedetermined.DecisionRules:Inordertovalidate(accept)ornullify(reject)anystatedhypothesistestedwiththemultipleregression,majorattentionwaspaid to theP-valuesof the testedconstructs.Therefore,werejected the null hypotheses where the SPSS p-values are less than alpha (0.05) and thealternativehypothesesaccepted.Also, the t-test was used ascertain the present tax system in Aba, in the opinion of therespondents, influence their firms’ performance. Where the t-calculated is more than t-tabulatedvalue,thenullhypotheseswillberejectedotherwiseitwillbeaccepted.

Table3: DistributionandRetrievalofInstrumentNumberofCopies

Distributed

NumberofCopies

Retrieved

NumberofCopiesLost

Numberofcopiesfound

useful

Numberofdiscardedcopies

PercentageofRetrievedandUsedCopied

162 153(94%) 9(7%) 148 5 91.00Source:Fieldsurvey,2018.

Table3shows thatoutof the162copiesof thequestionnairedistributed,153(94%)copieswereretrievedwhile9(7%)copieswerelost.Also,ofthe153copiesretrieved,5copieswereincompletelyfilledandthereforewerediscarded.However,148(91%)copieswerecompletelyfilledandfoundusefulforanalyses.Thus,furtheranalysesinthisstudywerebasedonthe148copiesretrievedandfounduseful.

Table4:DesignationofRespondentsOption Frequency Percentage

Directors/Owners 40 27.00MarketingManagers 70 47.00Accountants 38 26.00Total 148 100

Source:Fieldsurvey,2018.



Figure4.1:PiechartshowingthedesignationoftherespondentsAnalysisofDemographicVariablesofRespondentsInthissection,allthedemographicquestionsinthequestionnairewereanalyzed.Thissectioncoversresponsestoquestions1,2,3,4,and5.

Table5: DemographicsoftheRespondentsOption Frequency PercentageGender:MaleFemale

8068

54.0046.00

AgeBracket:18–2526–3536–45

46yearsandabove

29344936

20.0023.0040.0024.00

EducationalQualificationFSLC

O’Level/NDHND/BSC

MastersandaboveOthers

1947473005

13.0032.0032.0020.0003.00

MaritalStatusMarriedSingleOthers

756112

51.0041.0008.00

Lengthofstayincompany:Lessthan5years5–10years11–15years

16yearsandabove

38504020

26.0034.0027.0013.00

Source:FieldSurvey,2018.

Directors/Owners27%

MarketingManagers47%

Accountants26%

Frequency



Thisinformationisfurtherpresentedinthefollowingfigures:

Figure4.2:Piechartshowinggenderoftherespondents

Figure4.3:Columngraphshowingageoftherespondents

Figure4.4:Linegraphshowingeducationalqualificationoftherespondents

Male54%

Female46%

GenderofRespondents

01020304050

Series1

05101520253035404550

Series1



Figure4.5:Barchartshowingmaritalstatusoftherespondents

Figure4.6:Piechartshowingrespondents’lengthofstayinthecompanies

Table5andfigure4.2showthat80(54%)respondentsand68(46%)respondentsweremalesand females respectively. Also, Figure 4.3 disclosed that 29(20%) respondents, 34(23%)respondents,49(33%)respondentsand36(24%)respondentswereintheagebracketsof18-25,26-35,36-45and46andaboverespectively.Again,itemthreeinthetableandfigure4.4revealedthat56(45%)respondents,47(32%)respondents,30(20%)respondentsand5(3%)respondentshad, O’Level/ND, B.Sc./HND,Masters andaboveandother educationalqualifications respectively.Also, figure 4.5 shows that 75 (51%) respondents, 61(41%) respondents and 12 (8%)respondentsweremarried,singleandothersrespectively.Moreover,itwasrevealedthroughthelastiteminthetableandfigure4.6that38(26%)respondents,50(34%)respondentsand40(27%)respondentsand20(13%)respondentshadbeenintheirrespectivecompaniesforaperiodoflessthan5years,6to10years,11to15yearsand16yearsandabove,respectively.AnalysisofMajor(Research)VariablesInthissection,responsestothemainquestionswereanalyzed.

Table4.6: ResponsestowhetherthecompaniespaytaxesOption Frequency PercentageYes 148 100.00No 0 0.00

Notsure 0 0.00Source:Fieldsurvey,2018

Table6showsthatalltherespondents,representing100%,identifiedthattheircompaniespaytaxes.

0 50 100

MaritalStatus

Married

Single

Others

Series1

Lessthan5years26%

5– 10years34%

11– 15years27%

16yearsandabove13%

LengthofService



Table7:ResponsestoPerformanceQuestionsS/N Statement SA A UN D SD Total(a) Thetaxsystemaffectsmyprofitability. 98 21 14 10 5 148(b) Thetaxsysteminfluencesmysalesrevenue. 58 64 16 6 4 148(c) Thetaxsystemaffectsmycustomerbase. 66 42 24 9 7 148(d) ThetaxsysteminfluencesthenumberofemployeesIcan

influence.104 31 8 3 2 148

(e) Thetaxsystemaffectsmybusinessexpansionrate 108 28 6 4 2 148 Total 434 186 68 32 20 740 AverageTotal 87 37 14 6 4 148 Percentage 59 25 9 4 3 100

Source:FieldSurvey,2018

Theinformationisfurtherpresentedinfigure4.7asshownbelow:

Figure4.7:Linegraphshowingresponsestoperformancequestions

Table7andfigure4.7showthatanaverageof87(59%)respondents,37(25%)respondents,14(9%)respondents,6(4%)respondentsand4(3%)respondentstronglyagreed,agreed,hadnotdecided,disagreedandstronglydisagreedrespectivelyonstatementsabout theeffectoftaxationonbusinessperformance.

Table8:ResponsestoTaxAssessmentQuestionsS/N Statement SA A UN D SD Total(a) Themethodoftaxsystemonmyfirmissatisfactory. 18 32 20 68 10 148(b) Thetaxassessmentinplaceisobjective. 8 37 13 12 78 148(c) Thetaxassessmentisconsiderate. 14 27 16 82 9 148 Total 40 96 49 162 97 444 AverageTotal 13 32 16 54 32 148 Percentage 09 22 11 36 22 100


0

20

40

60

80

100

SA A UN D SD

Series1



Theinformationisfurthershowninfigure4.8thus:

Figure4.8:Piechartshowingresponsestotaxassessmentquestions

Information displayed in table 4.5 and figure 4.8 show that on the average, 13 (9%)respondents, 32 (22%) respondents, 16 (11%) respondents, 54 (36%) respondents and 32(22%)respondentstronglyagreed,agreed,hadnotdecided,disagreedandstronglydisagreedrespectivelyonstatementsabouttaxassessment.

Table9:ResponsestoTaxCollectionQuestionsS/N Statement SA A UN D SD Total(a) Iamsatisfiedwiththewaytaxesarecollectedfrommycompany. 24 47 13 7 57 148(b) Themethodoftaxcollectionisobjective. 31 33 10 8 66 148(c) Themethodoftaxcollectionisfriendly 11 40 31 16 50 148 Total 66 120 54 31 173 444 AverageTotal 22 40 18 10 58 148 Percentage 15 27 12 07 38 100


Figure4.9furtherdisplaystheaboveinformationusingacolumngraph.

Figure4.9:Columngraphshowingresponsestotaxcollectionquestions

Table 9 and shows that on the average, 22 (15%) respondents, 40 (27%) respondents, 18(12%)respondents,10(7)respondentsand58(38%)respondentstronglyagreed,agreed,hadnotdecided,disagreedandstronglydisagreedrespectivelyonstatementsabouttaxcollection.

SA9%

A22%

UN11%

D36%

SD22%

TaxAssessment

0

10

20

30

40

50

60

SA A UN D SD

Series1



Table10:ResponsestoTaxutilizationQuestionsS/N Statement SA A UN D SD Total(a) Iamsatisfiedwiththewaytaxescollectedareutilized 11 47 32 16 42 148(b) Taxesareusedtoprovideneededinfrastructureforthe

growthofourfirms.10 25 29 44 40 148

(c) Taxesareefficientlyusedbythegovernment. 21 32 21 34 40 148 Total 42 104 82 94 122 444 AverageTotal 14 35 27 31 41 148 Percentage 09 24 18 21 28 100


Theinformationaboveisfurthershowninfigure4.10thus:

Figure4.10:Linegraphshowingresponsestotaxutilizationquestions

Table 10 and figure 4.10 show that on the average, 14 (9%) respondents, 35 (24%)respondents,27(18%)respondents,31(21)respondentsand41(28%)respondentstronglyagreed,agreed,hadnotdecided,disagreedandstronglydisagreedrespectivelyonstatementsabouttaxutilization.Result:

ModelSummarybModel R RSquare AdjustedR

SquareStd.Errorofthe

EstimateDurbin-Watson

1 .745a .554 .545 .66941 1.874a.Predictors:(Constant),TaxUtilization,TaxCollection,TaxAssessmentb.DependentVariable:PerformanceofSMEs

ANOVAaModel SumofSquares df MeanSquare F Sig.

1Regression 80.249 3 26.750 59.695 .000bResidual 64.528 144 .448 Total 144.777 147

a.DependentVariable:PerformanceofSMEsb.Predictors:(Constant),TaxUtilization,TaxCollection,TaxAssessment

051015202530354045

SA A UN D SD

Series1



CoefficientsaModel UnstandardizedCoefficients Standardized

CoefficientsT Sig.

B Std.Error Beta

1

(Constant) 2.964 .126 23.558 .000TaxAssessment .213 .135 .333 2.158 .020TaxCollection .249 .107 .391 2.330 .021TaxUtilization .359 .168 .490 2.133 .035

a.DependentVariable:PerformanceofSMEsInterpretation:TheRvalue(0.745)showsthatastrong,positiveandsignificantrelationshipexistsbetweentaxationandonlineSMEsperformance.TheadjustedR2value(0.545)revealsthat54.5%variationinperformanceispredictedbytaxation.Also,theFvalue(59.70)andpvalue(0.000)whichare greater than f critical value at 0.05 level of significance (6.39) and less than alpha (0.05)respectively are positive signs of relationship. The coefficients table shows that tax assessment(t=2.158;p=0.020)andtaxcollection(t=2.330;p=0.021)andtaxutilization(t=2.133 ;p=0.035)significantpredictorsofperformance.Thisisbecausetheirp-valuesarelessthanalpha(0.05)andtheirt-valuesgreaterthant-critical.Decision: Based on the above outcomes, we therefore reject the null hypothesis and accept thealternatewhich implies that there is a significant and positive relationship between taxation andSMEsperformance..

SUMMARYOFFINDINGSBasedontheanalyzeddata,thefollowingkeyfindingsweremadeinthisstudy;

• ItwasdiscoveredthatthereisapositiveandsignificantrelationshipbetweentaxationandtheperformanceofSMEs.

• ItwasequallydiscoveredthroughthestudythattaxassessmentsignificantlyaffectstheperformanceofSMEs.

• Also,itwasdiscoveredthroughthestudythattaxcollectionsystemsignificantlyaffectstheperformanceofSMEs.

• AndthatthattaxutilizationsystemsignificantlyaffectstheperformanceofSMEs.

CONCLUSIONBasedonthefindingsofthestudy,wecanconcludethattaxationisakeyfactorinthefinanciallifeofanySME.FortheSMEstoperformsatisfactorily,thetaxsysteminplacemustpromotethe survivalof such firms.Thus, the tax collection, assessmentandutilizationmustbeSMEsorientedasthiswillinturnimpactonthegrowthoftheeconomy.

RECOMMENDATIONSThefollowingaresomeoftherecommendationsfromthisstudy:

• NigeriantaxsystemmustseektoprotectandpromotetheSMEsforthemtocontributemeaningfullytoeconomicgrowth.

• Itisalsoadvisabletoidentifytheagentsresponsibleforillegal,multipletaxcollectionsthatseektofrustrateSMEsanddealwiththemaccordingly.

• InordertogivebacktothetaxpayersandpromoteSMEs,thegovernmentatalllevelsmustjudiciouslyutilizetaxpayers’money.



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