Vous êtes sur la page 1sur 12




This study was carried out to find out the impact of taxes on the performance of micro small and medium
scale business enterprises in Nigeria taking a case study of Ondo North Senatorial District of Ondo state. The
study targeted at assessing the performance of business enterprise within Ondo North Senatorial District,
finding out if tax payers are aware of all their obligations, policies and problems affecting them as well as
their businesses. Over the years Micro small and medium enterprises (MSMEs) have been an avenue of job
creation and the empowerment of Nigerian citizens particularly in Ondo North Senatorial District providing
substantial percentage of jobs and also for local capital formation. However, the life spans of these small
firms are short. Among the possible factors are capital employed, daily expenses, daily sales and average
amount of taxation as a result of multiple taxation. The work further revealed that most business owners
are aware of taxes paid, uncertain of the mode of assessment and little assistance is given as regards tax
awareness. The study applied both qualitative and quantitative research designs where interviews and
questionnaires were used. The data was qua Findings revealed
that multiple taxation has negative effect on MSMEs survival and the relationship between MSMEs sizes
and its ability to pay taxes is significant. The works therefore recommend that government should come up
with uniform tax policies that will promote the development of MSMEs in Nigeria.

Taxation has three characteristics; it is a compulsory contribution imposed by the government on the
people residing in the country, it is a payment made by the tax payer which is used by the government for
the benefit of all the citizens and it is a payment not levied in return for any specific service rendered by the
government to the tax payer. Tax may also be an incentive or a disincentive to investment and savings
irrespective of whether the tax is direct or indirect. Tax represents a major source of income to
government and also a weapon that government uses to achieve goals of economic stabilization in the

According to Holbam (2009), taxation can contribute to economic development and welfare through three
sources; it must be able to generate sufficient funds for financing public services, it should offer incentive
for more employment and for an efficient income. Taxes therefore can be concluded as a proportion of the
produce of land and labour of a country placed at the disposal of the government.

Ojo (1996) opined that tax may be imposed as a means of which government appropriate part of private
sectors income and expenditure as its revenue for the purpose of meeting recurrent expenditure and
creating public capital formation towards the development and growth of goods and services of the
economy, a tax has effects on the behavior of the payer and some variables within his income and
consumption function.

On the other hand, multiple taxation is the imposition of different types of taxes that could have come
under one major umbrella on the payers by the government. It is at times referred to as levies. However,
it is believed that all compulsory levies or fees against an individuals and/or institutions by the government
are regarded as tax while imposition of excess and /or split burden under any guise is tantamount to
multiple tax.

Since independence, Nigeria government has developed strategies and promotion programs aimed at
improving the nations economy by promoting small scale enterprises both at state and local government
levels. Micro small medium Entrepreneur are key players in growing developing nations such as Nigeria. It
has long been observed to be the catalyst of economic growth and development and a source of tax
revenue to the government. Adebisi J.F and Gbegi D. O. (2013) stressed although MSMEs are small in size
they are most important enterprise in the country because of the fact when all the individual effects are
aggregated they surpass that of the larger enterprises.

Adam Smith in 1776 laid down principles upon which any good tax system must be based as equity,
convenience, certainty and cost of collection. How far has government in order to meet up with it
responsibilities been able to apply these principles? While the Federal Governments primary obligation to
citizens are stable general price level, increased rate of growth in Gross Domestic Product (GDP), increased
employment opportunities through various programmes including encouraging Micro Small Medium
Enterprises, the Federal Inland Revenue and States, local governments are busy introducing new taxes and
increasing the existing tax rates.

In Ondo North Senatorial district of Ondo State some of these taxes are unnecessarily split into many kinds
to the detriment of the entrepreneurs. The question is does the multiplicity of taxes enhance or constrain
the operational capabilities of micro small medium enterprises? What is/are the pay back or assistance
being received from the MSMEs from the governments? If any, in what area(s)? What type of changes has
multiple tax brought to MSMEs in Ondo North senatorial District? Is multiple tax desirable or otherwise to
MSMEs? These and other questions are the basis for this work.


The general objective of the study was to find out how the effects of multiple taxation has on the
performance of Micro small medium enterprises in Ondo North Senatorial District of Ondo State .Specific
objectives were as follows:

(a) To investigate the effect of multiple taxation on the performance of MSME

(b) To evaluate the challenges encountered by MSME in the payment of varied taxes
(c) To find out government interventions if any in assisting MSMEs
(d) To investigate if any, the level of contribution that multiple tax has on the rate of failure of MSMEs


Ondo North senatorial district is one of the three senatorial districts of Ondo State. Ondo state was created
on February 3 1976 from the Old western state of Nigeria with its capital in Akure. Ondo North Senatorial
District consists of six local governments viz Owo, Ose, Akoko North West, Akoko South East, Akoko North
East and Akoko South West and located in the equatorial region. The senatorial district is blessed with
fertile land largely good for plantation of cash and crops

Ondo North senatorial is regarded as an agrarian area with an average estimation population of 1,241,06
(NPC 2015). Modern industrial establishments are few, however there exist a growing rate of Micro Small
Medium Enterprises of varied types such as block industries, trading mining, eatery,

A situation where tax collectors collect more than the stipulated market taxes and levies (given different
names to the taxes and levies) to fund the date can also be regarded as multiple tax by MSMEs. A good
example of multiple tax is where a small holder farmer pays for business permit, registration fee,
development levy, market tax, personal income tax. Nonetheless, the local government still comes up with
their own numerous taxes on the same income, such as shop and kiosk rates, on and off liquor licenses,
slaughter slab fee, birth and death registration fee, excluding any street in the state capital.

Furthermore, they impose right of occupancy fees on lands in rural areas, (excluding those collectable by
Federal and State Governments), market taxes and levies ( excluding where state finance is involved),
motor park levies, domestic animals licenses fees, bicycle truck, canoe, wheel barrow and cart fees ( other
than a mechanically propelled truck). Other taxes include cattle tax payable by cattle farmers only,
merriment and road closure levy, radio and television license fees ( other than radio and television
transmitter) wrong parking charges, public convenience, sewage and refuse disposal, customary burial
ground permit fees, religious places establishment permit fees, sign board and advertisement permit fees.
Taxes and levies (Approved list for collection) Act 1998 No. 21, 30th September, 1998 from the above, one
will quickly notice that government at various tiers is verbally speaking for a support of MSMEs while
indirectly is discouraging some investors from investing in MSMEs due to high cost of capital caused by
multiple taxation. The focus of this study therefore, is to find out the effects of multiple taxation on the
Economic Empowerment of micro small medium Enterprises (MSMEs) in Ondo North Senatorial District 7
Ondo State.

Tax is a compulsory contribution made by the MSMEs / citizens to the government for the provision of
security, social amenities in order to create condition for economic well being of the society Appah E.
(2010) continuing, the stressed that over the development of sound tax policy and administration in
Nigeria. According to O major C. D Mubini M. (2008), Tax can be seen as the compulsory transfer of money
from citizens of a country to the government, which comes in as a source of revenue. From the definition
of tax according to O major C. and Mubiru M. (2008). Inference can be made that citizens might try to
avoid the payment of their tax, which is likely to attract punishment. There are various reasons why
governments implements tax policies which are to : (1) Finance a budget deficit (ii) Enhance long run
growth or (iii) counter other influences in the economy Bahinywa W. (2010). There are basically four major
principles of taxation which are certainty, equality or equity, convenience and economy. Romer C & Romer
D (2010). These are other principles of taxation which ranges from fairness ( implying that taxes should be
fair to payers as well as being aligned with the benefits received by tax payers), Economic growth ( taxes
paid should be geared towards the achievement of goals required for the economic growth of a country),
Equity ( tax payers revenue and expenditure should correspond with their tax liabilities), convenient (
implying that the system of paying taxes should be suitable for tax payers). Government efforts to diversify
the economy and reduce over depending on revenue, largely led to multiple taxes being imposed on
MSMEs. Multiple taxation means the subjection of the same income to move than one tax treatment or
imposition of many taxes or one tax payer.

Nigeria through National policy on MSMEs adopted a definition of SMEs on dual criteria; employment and
assets ( excluding land and building). The policy explained that small enterprise is one that has maximum
assets value of five million Naira and employed not more than 49 staff enterprise has between five million
Naira to five hundred Naira with a total workforce of between 50 and 199 employees.

Looking into non-oil sectors in Nigeria such as agriculture, manufacturing, commerce and tourism, these
industries are primarily made up of SMEs as such it goes without saying that SMEs are important to the
Nigerian Economy. The country is blessed with fertile from lands, vast mineral deposits and a wealth of
human resources making it a very favorable place for small and medium enterprises. These resources have
placed Nigeria in a prominent position in Africa, for governments; however, large companies are more
attractive, more clear-cut and less complex set that SMEs. In designing public policies, particularly tax
policies governments have usually targeted their strategies to large companies (Holban 2007). Therefore,
there is a need to devise method to encourage the growth and development of these enterprises so as to
ensure that they reach their full potential. Subsequently, a favoruable business and regulatory
environment needs to be created for them to thrive. Thus, for this study, the focus will be on supporting
MSMEs growth through tax policy, most large companies have those roots in small and medium
enterprises, they started out as MSMEs before expanding. This means that the future large corporations
are the MSMEs today that should be nurtured to ensure their growth. Furthermore, they are generally
perceived to be the seabed for indigenous entrepreneurship and generate all the many small investments
which would otherwise not have taken place (Anyetey and Ahere, 2004). Therefore, Nigeria needs to
further the development of its private sector by creating an environment favorable to the growth of
MSMEs strengthening the factors that lead to business success, and addressing the problems threatening
the existence and advancement of small and medium of enterprises ( Chu, Kara & Brozing 2008) with the
dismantling of trade and other banners, the world has been transformed into a global village.

Consequently, SMEs in developing countries are struggling to survive under intense competitive
environment both domestic and international. In developing countries the Nigeria, there is an urgent need
to provide the required economic transformation, such role includes mobilization of domestic savings for
investment, appreciable contribution to gross domestic product, increased harnessing of local raw
materials, employment generation, and significant contribution of poverty reduction efforts through
sustainable livelihoods and enhancements in personal income, technological development and export
diversification ( 5 martra Kalev, 2006). It is for this reason that an ideal tax policy needs to be adopted in
order to ensure economic growth and proper utilization of resources. However this is not the case because
taxes which are levied for regulating the investment behavior of the households and not for suffocating and
entrepreneur initiative seem to be a major constraint to the development of the MSMEs they are out to
cater for.


MSMEs are dominating other aspect of enterprises in Nigerian economy Nwankwo (1992) estimated that
probably up to 90 percent of all registered business organization in Nigeria are in the category of MSMEs.
This importance and contributions of MSMEs to national economy growth cannot be over emphasized.
They play a crucial role in providing solid base for a countrys socio-economic development.

MSMEs provide goods and services for both end and intermediate users and also utilize low capital cost for
creating jobs especially in the fast growing service of the economy.
Liedholm and mead ( 1987) observed that small and medium scale enterprises provide productive
employment and earning opportunities. Longneckor etal (1997) postulated that small scale enterprises in
United State 7 America have created over 3 million new jobs in manufacturing between 1976 and 1986.


MSMEs are faced with various issues when it comes to tax compliance one of them has to do with the issue
of multiple taxation. Multiple taxation has really affected MSMEs a lot, the truth still remains that they
issue of multiple taxation has been left unresolved until date. To this end, MSMEs, now view relevant tax
authorities as a threat to their business, and by so doing they find various ways to avoid these tax
authorities. This has led to nothing but high tax evasion by MSMEs. But there is need to understand to this
turmoil in a very large way. Although, it is important to understand that this issue connected to MSMEs,
there is also need to understand that the SMEs view tax as a danger to them. They view tax as an
instrument used by relevant tax authorities and the government to punish them for doing business. There
is need to understand that some of these small and medium entrepreneurs are illiterates, who have done
nothing but business all their life and therefore can only say their views, especially as it concerns taxes. It is
due to this fact that some of the MSMEs have resulted to tax avoidance.


There are a lot of problems that stunt the growth of MSMSEs, although there are some problems peculiar
to a particular country, the challenges faced by MSMEs in different counties and geopolitical divisions are
basically the same. For instance, a survey of Turkish MSMEs by organization for Economic Co-operation
and Development (OEOD) in 2004 shows that they were suffering the consequences of policy inconsistency,
poor access to finance, insufficient know-how and low level of technology, and so many others. The same
problems were also registered by other authors concerning other regions like the Philippines, Malaysia and
other European slates and of course in sub-Saharan Africa Nigeria inclusive as shown by different authors
on the issue. Uzor ( 2004) believes that the constraints faced by MSMEs in developing countries are not
only accentuated with ineffective policy design, but also by market in the region. Their lack of information
technology and knowledge of automation is gradually being reduced given that they serve as contractors
for larger firms particularly the foreign manufacturing firms. A major difficulty faced by MSMEs is that of
lack of access to short and long term capital publication of the weekly trust of Saturday, January 22, 2011
recognizes the fact that collateral based financing has become increasingly difficult for MSMEs, whether as
existing business. In their expansion states or as start ups hence more MSMEs are resorting to viability
lending in which case they obtain loans based on the viability of the business and health of cash flow.
Banks are usually reluctant to lend to MSMEs and this is because of problems such a s the MSMEs inability
to meet the banks lending requirements, promotes low education management and entrepreneurial skills
and poor and unreliable financial records which makes financial review difficult (Aderemi 2003). There is
also the problem of unsound accounting system and lack of full financial disclosure Arteetey & Ahere (
2003), buttressed this assertion by listing lack of access to land, utility installation and services, and import
procedures as constraints to MSMEs growths. Summarily, these problems make MSMEs a high risk
venture. The above named reasons are in and of themselves problems that impede MSME growth because
not only do they become obstacles in accessing financing they are capable of hindering growth on their


Generally, effects of taxation refer to all the changes in the economy as a result of tax imposition.
Anyanwu ( 1997) noted that the presence of tax distorts the pattern of production, consumption,
investment, employment and other similar patterns for good or for bad.

Seddon ( 1975) had the same view that tax affects productions. He said that the extent to which the
volume of production is affected by a tax depends upon its influence on the ability and the desire to work,
to save and to invest. To estimate the effects of taxes on production and growth would require knowing the
effects of tax on the allocation of existing productive resources. A change in taxation will cause a
realignment of consumers wants and the reallocation of factors of production. This affects the demand for
goods and services of the products of MSMEs.



A survey research method was used which involved the use of questionnaire, interview, past publications
and records the researcher chose survey method because it is effective when opinions of people are sort
for, attitudes and descriptions, more especially in getting cause and effect relationship

This study was conducted using 750 MSMEs in Ondo North Senatorial district of Ondo State which
comprises of the following local government; Akoko North East, Akoko North West, Akoko South East,
Akoko Southwest, Ose and Owo Local government with total number of one million sixty five thousand
three hundred and fifty ( 1,065,350 residents source; Wikipedia search) 2006 population census.


Analysis of data refers to those techniques whereby the investigation extract from data or information that
was not apparently there before and which would enable a summary description of the subject studied to
be made. The information being referred to here is the information that enabled the study to test the
research hypotheses. Also the statistical tool of frequency table and percentage were used to present and
analyze data collection and also tested the research hypotheses with the analysis of variance (ANOVA).


Validity of instrument is defined as the ability of instrument to measure what is supposed to measure
validity of measuring instrument is determined by its content which stresses adequate coverage by the
instrument of the scope implied by the topic of study.

Hence, for the sake of validity of the measuring instrument that was used, the researcher ensured that
questions asked in the questionnaire exhaust all that were implied by the research questions and
hypotheses. The instrument was validated by expert in the field of study, paying particular attention, the
relevance to the subject matter and their coverage of the entire work.


Data analysis refers to those techniques whereby the researcher retrieved information that was not
apparently there before but would enable a summary description of the subject studied to be made,
Adebisi, J. F and Gbegi D. O. (2013). Stressing the data was to enable the study to test the research
hypotheses. Again, the statistical tool of frequency tables and percentages were used to present and
analyze data collected and tested the research hypotheses with the Analysis of variance ( ANOVA) Adebisi,
J.F and Gbegi D.O (2013). Formular for the Analysis of variance (ANOVA) as shown below:


The data presented below were collected from MSMEs center during the field survey on the appraisal of
The effects of multiple taxation on the economic empowerment of Micro small medium Enterprises (
MSMEs) in Ondo North. Senatorial District of Ondo State. This will be geared towards testing the research
hypotheses leading to drawing conclusions, recommendations and suggestion
Table 4.1 DO YOU PAY TAX?
A YES 643 99%
B NO 2 0.3%
Source: Field survey, 2016.
From table 4.1 above, respondents representing 99% of the total sample size say their enterprises pay tax,
2 respondents representing 0.3% say they do not pay tax.

Table 4.2. How many types of taxes do you pay within a year?


A 0 2 0.2%
B 12 23% 36.3%
C 34 306 47.16
D 45 72 11.25
E 5and 31 5%
TOTAL 645 100%

Source: Field survey, 2016

The table above shows the response rate of how many types of taxes within a year, 2 respondents
representing 0.3% of the sample size sat zero (0) 234 respondents representing 36.3% say they pay
1 2 types of taxes within a year, 300 respondents representing 47.4% say they pay 3 4 types of
taxes within a year, meanwhile, 72 respondents representing 112% say they pay 4 5 types of taxes
within a year and 31 respondents representing 5% say they pay 5 and above type of taxes within a
Table 4.3 What is the average payment per tax/levy


A 1 1000 40 6.2%
B 1001 2000 300 47%
C 2001 3000 196 30.4%
D 301 and above 109 1.7%
E 645 100%

Source: Field survey, 2016

From the result on table 4.3 above, 40 respondents representing 6.2% say the average payment per
tax/levy is N1 N1000, 300 respondents representing 47% say the average payment per tax/levy is N1001
N2000, meanwhile, 196 respondents representing 30.4% say the average payment per tax/levy is N2001
3000 and also, 109 respondents representing 17% say the average payment per tax/levy is N3001 and

Among the factors responsible for these untimely close-ups are tax related issues, ranging from multiple
taxations to enormous tax burdens e.t.c. in many government policies small and medium enterprises are
usually viewed and treated in the same light as large corporation. However, their size and nature makes
them unique. Therefore, in dealing with small and medium enterprises 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 boost the growth of small business and the most effective ways
to administer them. The importance of small business 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 conducive environment is created for these small businesses to
grow through proper regulation, the SME 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 are infrastructure
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.
Tax multiplicity is a major problem in Nigeria as many business organizations are not favored by the tax
systems and policies in place.