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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.' A t 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-ofthe 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 administratiori and it should be understandable to the taxpayer.

Taxes therefore are known to play important role in the process of development of an economy. This is the role of providing finance for government expenditure. There are three main objectives of taxation. These include, raising of revenue for the government, regulating the economy and economic activities, and controlling of income and employment.

A tax, although may be imposed for the above purposesfit has effects on the behaviour of the payer and some variables within his income and consumption function.

Small-scale enterprises have so many definitions due to different criteria employed by different people and institutions in defining it. There is no single, uniformly accepted definition of a small firm (Storey, 1-994)

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, the followings are some definitions of small scale enterprises: The World Bank Document (Report No 7114) of 1988 on Nigeria defined small and medium enterprises as one whose total fixed assets (excluding land) plus cost of investment do not exceed ten million naira in constant 1985 price. Mead (1984) defined small-scale enterprises as firms with less than.. -50 employees and at least half the output is sold.

Bolton committee (1971) formulated an economic definition of small-scale enterprise as a firm that meets the following three criteria:

i .          It has a relatively small share of their market place;

ii.           It is managed by owners in a personalized way, and not through the medium of a formalized management structure;

iii.          It is independent, in the sense of not forming part of a large enterprise.

I n the Nigerian context, the multiplicity of definitions for small-scale enterprises is the rules rather than exception. Nwankwo (1992) noted that as a result of differences .in policy focus, different government agencies in Nigeria apply various definitions to small and medium scale enterprises.

The Centre for Industrial Research and Development (1990) defined small-scale enterprise as one whose total assets in capital equipment, plant and working capital are less than two hundred and fifty thousand naira and employing fewer than fifty full-time workers. Central Bank of'',~igeria(2002) defined SME as a firm with capital outlay of n o t more than N200m. National Council of Industries (2003) defined small enterprise as a project with capital investment of over Nl . 5 million but not more than N50 million and/or work force of between 11 to 100 workers.

A     definition of. small-scale enterprises, which has enjoyed wider acceptance, is the one given by the United States Committee for Economic Development. It defined small-scale enterprise as any enterprise that is characterized by, at least, two of the following features:

i.             Management is dependent - usually managers are also the owners;

ii.           Capital is supplied and ownership is held by an individual or small group;

iii.         Area is localized; while workers and the owners are of one home or community, market need not be local; and

iv.         The size of the firm is small relative to the industry.

I n fact, the concept, small scale enterprise more often called small and medium-size enterprise (SME) is relative and dynamic, hence there is no universal definition for small scale enterprises. Researchers, because of this problem of definition adopt definitions for small-scale enterprises, which are more appropriate to their particular target group.

To this effect, small scale enterprise within the context of this work is any business organization which has working capital between one hundred thousand naira and ten million naira excluding land and employs fewer than fifty full-time workers. Sule (1986) observed that definitions of SSEs vary across countries and business environment as a result of differences in industrial organization at different level of economic development in parts of the same country.


Ebonyi State was created in 1996. .It is one of the most newly created States in the country. Projecting from the 1991 population census, the state has a population of about 1.8 million people and has a landmass of approximately 5, 932 square kilometers.

The state has. 13 Local Government Areas and 21 Development Centres. Politically, the state has three senatorial ,zones namely Ebonyi North, Ebony Central and Ebonyi South Senatorial Zones. There exist three major commercial areas in the state, which include. Abakaliki Commercial area, Onueke Commercial area and Afikpo Commercial area. The state is predominately rural.

Economically, the basic occupation of the people is farming, which in 1991 accounted for 87 percent of the working population as against a national average of 6 1 percent. Modern industrial establishments are few and are concentrated in Abakaliki and environs.

Due to the fact that the State is economically a growing state, there exist many small-scale enterprises 'in the state. Most of these small-scale enterprises fall within the range of farminglextractive enterprises to processing and service oriented Enterprises with a few manufacturing enterprises. Some of these enterprises "include, quarry industries, block industries, Rice mill industries, poultry farms and related enterprises. However, the state has great potential for solid mineral exploitation.


Government in . order to meet up with its responsibilities of providing social infrastructures and other development projects for her citizens imposes taxes on her citizens. This is done by the different tiers of Government-Federal, States and Local Governments with respect to their fiscal powers (Tax Powers). However, the rate at which the governments concerned increase the existing taxes should be a thing of concern to economic agents.

While the Federal Government is cl'amouringfor a stable general price level, increased rate of growth in Gross Domestic Product (GDP), increased employment opportunities, through the establishment of small-scale enterprises; the state and local governments are busy introducing new taxes and increasing the rate of the existing taxes.

I n ~ b o n y i . ~ t a tthe, following taxes or levies (as they are called by the government agents that impose them) are being paid by small scale enterprises: personal Income tax, Sanitation fee, market toll, Business Registration fee, fire service fee, Development levy, Education levy, Advert fee, different types of permit fee paid according to occupation engaged in, produce levy, haulage fee etc. Some of these taxes -are being unnecessarily split into many kinds of taxes to the detriment of the entrepreneurs.

The question then is, does the multiplicity of taxes by the lower tiers of government enhance or constrain the operational capacities of small-scale enterprises. Government tax agents justify the collection of these taxes by arguing that the infrastructure provided ' by government with tax revenue, in no little measure contribute to the increased productivity of the SSEs. SSE operators on the other hand, argue that the government is not providing any infrastructure to attract the numbers of levies being imposed on them.

How  then   can  one   reconcile  these   two   opposing


views? Do these taxes really contribute to the increased productivity of. the SSEs or do they hamper the growth and development of SSEs as claimed by SSE entrepreneurs?

Many advanced industrial economies of the world attained advanced industrial development because they started their industrial development with programmes in the small -scale enterprises. SSEs contribute to the long-run industrial growth by producing an increasing number of firms that grow up and out of the small-scale sector. Why is it that in Nigeria and particularly in Ebonyi State, this trend is not being observed? Rather th-an growing, most of the SSEs are at the threshold of extinction. Do multiple levies (taxation) contribute significantly to the inability of SSEs to grow out of the small sector?

Government is to be a catalyst that provides the enabling environmerlt for small-scale enterprises to thrive. Taxes should be

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