1.1 Background of the Study

Taxation can simply be seen as a compulsory transfer or payment of money from private individuals, institutions or groups to the government. It may be levied upon wealth or income in the form of sur-charge on prices. Taxes therefore are a proportion of the produce of land and labour of a country placed at the disposal of the government. Multiple taxation on the other hand, is the imposition of different types of taxes that could have come under one major tax form on the people by the government.’ At times some of the taxes are christened levies. However, within the context of this work, all compulsory payment made by individuals and institutions to the government are regarded as tax. Taxes generally provide basis for government revenue, which help them in carrying out their functions.

This is why Ojo (1996) defined tax as a means by which government appropriate part of private sector’s 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 good tax possesses the following qualities: fairness, convenience, simplicity, and minimum cost of collection and minimum distortions. Musgrave (1980) noted that taxes should be chosen so as to minimize interference with economic decisions in otherwise efficient markets. Imposition of excess burden should be minimized. Again, a good tax system- should permit efficient and non-arbitrary administration and it should be understandable to the taxpayer. Firms differ in their levels of capitalization, sales and employment. Hence, definitions which employ measures of size (number of employees, turnover, profitability, net worth, etc) when applied to one sector could lead to all firms being classified as small, while the same size definition when applied to a different sector could lead to a different result.

However, Holban (2007) posited that taxation can contribute to development and to welfare through three sources; It must be able to generate sufficient funds for financing public services and social transfers at a high level of quality, it should offer incentive for more employment and for an efficient and lasting use of natural resources, finally it should be able to reallocate income. But in the case of businesses, tax must be done in such a way that puts their income and need for survival into consideration. it is expedient that enough profit is allowed them for the purpose of expanding their businesses. The tax policy must be one that will not encourage businesses to remain in the informal sector or to evade or avoid tax payments. More so, many small firms in Africa, including Nigeria, choose to remain in the informal sector because the perceived benefits outweigh the perceived costs. Firms rarely see their tax contributions at work and the compliance costs are high, thus discouraging compliance. The government is also discouraged from collecting taxes from small firms, because the cost of monitoring and collecting tax from small businesses by revenue authorities, whose resources are usually scarce, sometime outweighs the revenues generated by small businesses (Stem and Barbour 2005).

1.2 Statement of the Problem

Although there was a general perception that tax is an important source of fund for development of the economy and provision of social services, the problems faced are in the area of negative relationship between taxes and the business’ ability to sustain itself and to expand, businesses are faced with the problem of high tax rates, multiple taxation, complex tax regulations and lack of proper enlightenment or education about tax related issues. Not minding other challenges that businesses are facing in other developing countries like Nigeria; inadequate capital, poor technical and managerial skills, environmental effects and the government regulations which is most affecting the operation of businesses in Nigeria especially this issue of multiple taxation which is a worm eating deeply and the large chunk of revenues generated by these businesses for their growth and survival. These have led to increase in record of dearth of businesses in Nigeria.

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