The Impact of Taxation Policies on the Performance of Small to Medium Enterprises

Abstract

Purpose:The study investigates challenges faced by Small and Medium Enterprises (SMEs) in the introduction of new government taxation policies to financial performance of SMEs. Design/Methodology/Approach: Multiple regression model were used to measure the relationship between point of sale transaction tax, mobile money taxes and financial performance. SPSS and EXCEL were used to analyze the study data and to identify the descriptive characteristics of the dependent and independent variables and results of the test. Findings: From the research conducted the research findings indicate that intermediate money tax transfer has a significant impact on the financial performance of SMEs, the research also showed that there is a negative impact of mobile money tax transfer and bank transfer tax to the financial performance of SMEs. It was also established that there is a negative relationship between SMEs in the supply chain as all SMESs agree that mobile electronic tax transfer result in increase in cost of transactions and decrease in number of transactions. Practical Implications: Consultations between government, stakeholders and revenue authority should be encouraged so as to accommodate SMEs when introducing new taxation policies. Policy makers should consider tax reduction and increase tax incentives to SMEs in order to boost their financial performance. While both consumers and SMEs have very genuine reasons to strongly agree that IMTT has increased their cost of transactions and resulted in decrease in purchasing power, the government should refine the legislation from an administrative point of view and also relook at it so as to lessen the burden on the final consumer and decrease the cost of doing business. Originality/Value: It considers the fact that the intermediate tax has impact on the economy and small businesses.

The effect of trade liberalization on SMEs performance in Nigeria

“…In the same vein, increases in taxes are expected to reduce SME performance through a fall in investment income. This finding is similar to Ongayi et al (2021), who showed a negative effect of taxes on the financial performance of SMEs. In the long run, the positive effect of taxes on SME performance is suggestive of public use of tax funds for basic facilities, particularly in terms of key infrastructure that promotes business operations.…”

“…When taxes are implemented to improve infrastructure and enhance business operations, positive effects are expected. However, where there is tax implementation with no associated infrastructure provision to reduce the overhead cost of operation, negative effects are expected (Ongayi et al, 2021). Hence, 0 < α 6 < 0.…”

Tax Payment and the Performance of SMEs: A Longitudinal Analysis on EU Countries

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