IMPACT OF MULTIPLE TAXATION ON THE DEVELOPMENT AND SURVIVAL OF SMALL SCALE REAL ESTATE FIRMS

ESV ABU USMAN

The performance and growth of small and medium enterprises (SMEs) is a major driver and indices for the level of industrialization. Similarly, SME’s sector plays a crucial role in maintaining high employment and income generation and is therefore critical for a country to achieving sustainable growth while multiple taxation is harmful to businesses as they promote uncertainty and unlock the channel for revenue leakages. The study objective is to examine the relationship between multiple tax and the survival of SMEs in Nasarawa State as it relates to up-coming real estate firms. The study found out that there is significant relationship between multiple taxation and survival of SMEs in Nasarawa State. The study further recommended that Management should communicate with the tax official for reduction in tax imposed for the organization and that Government especially the local governments need to move away from the urge to control all business activities and give SMEs, especially real estate firms, the breathing space to more efficiently allocate their resources and decide on activities for themselves.

Every country has taxation as a means of funding its many duties and as a means of encouraging the expansion of certain economic sectors. In addition to being the main source of funding for the government’s obligations to its constituents, taxes also serve as a check on the implementation of specific government economic objectives, such as fostering an atmosphere that is conducive to private enterprise (Liu, Shi, Yang & Zhang, 2023; Yu, Nahm & Song, 2020). Taxation, as an economic regulator, is a powerful weapon for advancing economic wellbeing by fostering an environment that is tax-friendly and favourable to the survival and expansion of firms (Tarsue, 2024; Ayano, 2022; Osita, 2017). According to Shang (2023), Demaci (2022), Adeola, Gyimah, Appiah and Lussier (2021) developed and emerging nations alike want to see the growth of private businesses. The development of jobs and the reduction of poverty in Nigeria have been greatly aided by private companies classified as Small and Medium Enterprises (SMEs), which also contribute significantly to the GDP of the nation. It is impossible to overstate the socioeconomic role that SMEs have had in the development of the nation, as they have been a primary driver of innovation, employment, and wealth creation (Attah & Wada, 2023; Kaira & Rześny-Cieplińska, 2019; Akpoviroro, Adenuga & Sabitu, 2019; Faloyin, 2015).

Khuan (2024) opined that the realm of capital creation, manufacturing/production, service delivery, telecommunication, agriculture, and other engineering endeavours, SMEs have played a pivotal role in driving the nation’s economic progress through entrepreneurship. Since the sector has been the main engine of economic growth, the government has encouraged private businesses through a variety of tax breaks, credits, exemptions, allowances, and holidays. These measures are detailed in the Nigeria Investment Promotion Commission (NIPC) and Federal Inland Revenue Service (FIRS) compendium of investment incentives of Nigeria 2017 (Jooji, 2023). Crentsil (2023), Tung (2022) and Omah (2016) noted that taxation and generous tax policies are two effective fiscal policy tools utilised to promote entrepreneurship and private sector initiative and growth. In agreement with the above submission (of Crentsil; 2023; Tung, 2022 & Omah, 2016), Martins (2024), Jim-Suleiman and Ibiamke (2021) and Momoh (2017) claimed that Nigeria’s low, uniform tax rates and attractive tax breaks for new companies have spurred the expansion of private enterprises in these nations. In order to meet national demands, developing countries in sub-Saharan Africa, like Nigeria, must promote the expansion of SMEs. The government has a significant tool in taxation that it may use to incite private investment based on the needs and goals of the country. Nigeria places a high priority on national requirements such industrialisation, employment generation, poverty reduction, and self-reliance.

The broad consensus is that taxes are a vital source of funding for social service delivery and economic growth (Dirir & Aden, 2023; Omodero & Dandago, 2019). The issues lie in the inverse relationship between taxation and the capacity of businesses to grow and survive. High tax rates, multiple taxes, complicated tax laws, and inadequate knowledge or instruction about tax-related matters are challenges experienced by small enterprises (Bhalla, Sharma & Kaur, 2022; Douglas, 2018). As these unlawful taxes continue to eat up a sizable portion of SMEs’ profits, Lasisi (2023) and Kaigama (2016) found that the numerous taxes levied on them are a significant contributing reason to the sudden collapse of these companies in Nigeria. The issues faced by SMEs can be classified as internal or external. Obtaining raw materials, low-capacity utilisation, fierce rivalry from larger firms, and other internal issues are some of the problems.
This research is aimed at finding out the effect of multiple tax on the growth and development of Small and Medium Entrepreneurs (SMEs) as it relates to real estate businesses with a view of opening the consciousness of the Government agencies to SMEs` taxations predicaments.
According to Park (2023), Sholihah, Naufal and Ariescy (2023) and Islam and Wahab (2021), a nation cannot achieve sustained growth if its SMEs sector is not able to sustain high employment and income generation. SME’s must concentrate on several crucial business issues in order to strengthen their position, including cutting expenses, raising worker productivity, creating a competitive edge through high-quality goods and services, and implementing other entrepreneurial initiatives (Perdana & Prasasti, 2023; Hellen, 2015). The government must provide the required infrastructure to the SMEs sector in order to realise the sector’s growth potential and the only way to do this is by taxing the same sector in order to benefit from the infrastructure that is being provided (Sohal, 2023; Singh, Singh & Prakash, 2022). The Central Bank of Nigeria (CBN) characterises a small and medium-sized firm (SME) as one that has no working capital or land, a maximum asset base of NGN 200 million, and no fewer than 10 nor more than 300 employees (Samuel, 2024; Uche, 2023; Victor, Sylvanus, & Samuel, 2020). Owing to their adaptability, SMEs can tolerate a wide range of economic conditions. Although they can be more formally referred to as organised and unorganised firms, SMEs in Nigeria can be divided into urban and rural categories. While unorganised businesses are primarily made up of craftspeople who work in public areas, organised businesses employ paid workers and have a registered office. Small and medium-sized businesses’ (SMEs’) performance and expansion are important indicators of various aspects of society, including modernisation, urbanisation, gainful and meaningful employment for all those who can and want to work, equitable income distribution, welfare, income per capital, and the standard of living enjoyed by the populace (Elpisah, Yahya & Hasan, 2022; Atabayeva, 2021; Aremu & Adeyemi, 2015). This is because SMEs grow employment more quickly than larger businesses (Azam, 2024; Hoda, 2023; Clément, 2023; Budiarto, Diansari, Afriany, Nusron, & Seta, 2022; Farouk & Saleh, 2015).

Small and medium-sized businesses’ (SMEs’) performance and expansion are important indicators of various aspects of society, including modernisation, urbanisation, gainful and meaningful employment for all those who can and want to work, equitable income distribution, welfare, income per capital, and the standard of living enjoyed by the populace (Atabayeva, 2021; Iacono & Ranaldi, 2021; Al‐Haddad, Sial, Ali, Alam, Khương, & Khanh, 2019; Aremu & Adeyemi, 2015). This is because SMEs grow employment more quickly than larger businesses (Azam, 2024; Hoda, 2023; lowast, Sharma & Banerji, 2020; Farouk & Saleh, 2015). With 200 or fewer employees making up the largest business sector in every global economy, the SMEs sector is widely recognised as a key driver of economic growth and the creation of jobs in both developed and developing nations. Governments everywhere are increasingly encouraging and supporting the growth of SMEs as part of their overall national development strategies (Ramasimu, 2023; Nasir, 2023; Abdullah & bin Dakar, 2016). According to Harrison and Watson (2018), SMEs’ adaptability, minimal risk, straightforward organisational structure, and responsiveness are what really allow them to be innovative.
Resources that can improve the performance and growth of SMEs are tied to the financial factor. Due to their operations in an unfavourable financial planning environment characterised by high interest rates, high collateral requirements, information access challenges, and limited market exposure, SMEs in the nation perform poorly and have significant failure rates (Callahan, Sidener, DeBar, Deshais, Pane, & Patil, (2023). For SMEs to be able to improve their borrowing capacity, the financial planning environment should support their ability to manage, monitor, and aggregate business plans and forecasts by product and location. According to Penrose (2019), “there is a relationship between a firm’s ability to attract financing, its competitive advantage and its entrepreneurial spirit, and the challenge of capital shortages may frequently be linked to the availability of entrepreneurial services.”
Corporate governance, according to Mahmood (2018), is a crucial component of SMEs’ competitive advantage, sustainability, and performance. Corporate governance pertains to the distinct responsibilities that shareholders play as both owners and managers. It has to do with policies that support and foster the growth of SMEs and other economic sectors so they can optimise the use of available resources (Dianu, Ciucos, Badulescu & Badulescu, 2021). It also involves creating and adhering to policies and guidelines for managing and operating a business, as well as putting in place a system of checks and balances to prevent power abuses and guarantee the accuracy of financial accounts (Njinya & Pendati, 2021; Eniola, 2014). As a result, SMEs in the nation continue to face numerous challenges despite the advancements and advances this sector has seen over this time.
The Importance of SMEs to the Nigerian Economy
Similar to certain emerging and developed nations, Nigeria has a similar percentage of SMEs and an equivalent economic impact. Nigerian SMEs are crucial to the country’s economic growth, especially in the manufacturing and construction industries. According to research conducted by the Federal Office of Statistics, 97% of all Nigerian enterprises have fewer than 100 employees. According to the previous definition of SMEs, small enterprises account for 97% of all firms in Nigeria. Based on Ariyo’s (2015) findings, the SME sector accounts for 50% of Nigeria’s industrial output and 50% of its employment.
In Nigeria’s manufacturing sector, SMEs make up between 70% and 90% of all business establishments (Oyelaran – Oyeyinka, 2016). SMEs account for over 70% of all new jobs created annually and more than 90% of employment opportunities in the manufacturing sector. SMEs in Nigeria are perceived as the creativity and ingenuity of entrepreneurs in the utilisation of the abundant non-oil natural resources of this nation will provide a sustainable platform and spring board for industrial development and economic growth, as is the case in the industrialised and economically developed societies. In addition, SMEs have the potential to serve as a bedrock for the development of entrepreneurial skills, equitable distribution of income, wealth creation, employment generation, and sustainable economic development (Onwumere, 2016).
The Minister of Trade and Commerce, Olusegun Aganga, examined data from a survey carried out by the Federal Bureau of Statistics (FBS) in the 36 states of the federation and the Federal Capital Territory (FCT). The results indicated that there were 17.28 million SMEs in the nation overall, of which 17.26 million were microbusinesses valued at less than N5 million (Nigeria Bureau Statistics, 2017). It demonstrates that microbusinesses have grown in several states and account for almost 99% of all MSMEs in the nation. The performance of small and medium-sized enterprises varies by nation and by kind of business. Lagos State had the most percentage of SMEs in the nation (17 percent), closely followed by Kano State, and Osun State had the lowest percentage (0.4 percent) of SMEs nationwide (NBS, 2017). It is evident from the percentage of micro, small, and medium-sized businesses in the Nigerian economy that microbusinesses make up the majority of all businesses in this country. It bears witness to the reality that the bulk of the workforce is employed by SMEs, and particularly micro firms.
Globally, development economists, entrepreneurs, governments, venture capital firms, financial institutions, and non-governmental organisations have all expressed a great deal of interest in the performance and development of small and medium-sized enterprises (SMEs) (Baker, 2017). According to Armstrong and Baron (2018), performance management entails developing a common understanding of what needs to be accomplished and how it will be accomplished as well as a people management strategy that maximises the likelihood of success within a predetermined framework of predetermined objectives, standards, and requirements for both individual and team competence.

Concept of Multiple Taxation

Nigerian tax policy has mostly been utilised to maximise government revenue; as a result, it is not being used to allocate resources or redistribute revenue in an optimal manner. According to Anyanwu (2017), Nigeria’s tax authority has focused on manipulating tax bases and rates to bring in enough money for the government. As a result, tax authorities have been forced to impose various levies and taxes. In this work, the term “multiple tax” refers to these various taxes that, in a more ideal world, would all fall under one main tax category but are instead divided into numerous forms. Ndekwu (2018) noted that a large number of taxes have several bases, differing payment schedules, and are levied at inconsistent or supplemental rates. Tax policy planning in Nigeria is not explicitly assigned to a certain unit. Any modification to the tax code is typically made on the spur of the moment and is motivated more by practicality than by thorough research (Anyanwu 2017).

Multiple Taxation’s Effect on Nigeria’s SMEs’ Development
The term “effects of taxation” generally refers to all the changes that occur in the economy as a result of the imposition of taxes. Anyanwu (2017) observed that the existence of taxes distorts patterns of production, consumption, investment, employment, and other similar patterns for good or bad. He further stated that the degree to which a tax affects the volume of production depends on its influence on the ability and desire to work, save, and invest. In order to estimate the effects of taxes on growth and production, one must first understand how taxes affect the distribution of already productive resources. The reallocation of production factors and the realignment of consumer preferences will result from changes in taxation. This has an impact on the demand for small-scale businesses’ goods and services. According to Longenecker (2017), taxes place a significant strain on the cash flow of small enterprises and, as such, are an expensive drain on their financial stability. The current degree of government regulation, including taxation, according to Lindsey (2017), is “high, so complicated, and so intensive that it’s strangling business and suppressing productivity of small business.” Nigeria imposes a number of taxes on small and medium-sized businesses, such as revenue taxes, market taxes, environmental sanitation fees, fire service fees, business registration fees, produce fees, revenue taxes, emblem levies, retail permits, trade permits, etc. (David, 2019).
Empirical Review of Related Studies
A research of Lagos Island local government was conducted by Segun and Osazee (2018) to examine the impact of various tax regimes on sustainable development among small-scale firms in Lagos state. The study’s objective was to ascertain how the cost of various taxes affected small businesses’ ability to operate, especially those located on Lagos Island. Data were gathered from Lagos Island Local Government small business owners using primary sources. A straightforward percentage of inferential statistics was used to analyse the data. It was found that there is a strong correlation between small-scale businesses’ business performance and their MT burden. The report suggested that the Nigerian government create an organisation to handle the MT problem. A study on the impact of multiple taxation on the performance of SMEs in Benue state was carried out by Ocheni and Gemade (2015). The study’s objective was to investigate how multiple taxes affect the survival of SMEs. A questionnaire was used to gather data for the study from 74 respondents who were small- and medium-sized business owners in the state of Benue. Basic non-parametric statistical percentages were used to examine the responses. Results imply that SMEs’ ability to survive is negatively impacted by several taxes. In order to support the growth of SMEs in Nigeria, the study suggested that the government create standardised tax laws.

Theoretical Framework

The “Theory of Public Expenditure” serves as the theoretical foundation for this investigation. It is the cost that the government bears to carry out its functions. With an increase in state activity, it could be challenging to distinguish between the amount of public spending that goes towards supporting the government and the rest going towards advancing society and the economy as a whole. Despite the fact that public spending has grown significantly over time and has a significant impact on the national economy, little is known about this sector of the economy. Research on public spending has only looked at broad trends about how it affects pricing and employment (Adanis, 2019). Below is an examination of two prominent theories of governmental expenditure: German economist Adolph Wagner proposed the theory of the rule of increasing activities in 1890. The analysis finds that there are innate inclinations for government activity to increase in both intensity and scope. Furthermore, there is a functional relationship between the expansion of government operations and the growth of an economy, with the governmental sector growing at a higher rate than the economy. Moreover, intentions from all levels of government, but particularly those at the state or local level, have shown a similar tendency towards higher spending.

Conclusion and Recommendations

SMEs in Nigeria have been subjected to several taxes, their imposition, and unfavourable collection procedures. These issues have been grave, and successive governments have paid less attention to developing solutions to reduce them. Regrettably, while the immediate negative effects of multiple taxes are felt at the micro level, the national economy suffers more from multiple taxes due to decreased revenue and a high employment rate because entrepreneurs will evade taxes and be reluctant to start new businesses or grow their current ones. This will undoubtedly make Nigeria’s unemployment problem worse, which the government is already grappling with. Thus, Nigerian government action at all levels must be taken immediately. It is in the interest of Nigerians, the government, and entrepreneurs alike, to reduce the socioeconomic impact of various taxes on SMEs.
In light of this perspective, the following suggestions are made:
The various taxes in Nasarawa State, Nigeria, impede the expansion and development of SMEs. As a result, the management of SMEs in Nasarawa State needs to rethink their approaches so that the company won’t be burdened by numerous taxes.
In order to lower the organization’s tax burden, management should speak with the tax official. Governments, particularly local ones, should stop trying to regulate every aspect of business operations and instead give small and medium-sized enterprises (SMEs) more leeway to allocate their resources more effectively and choose their own course of action.
Since there is a correlation between SMEs’ sizes and their capacity to pay taxes, tax authorities should base their tax collection on the relationship between SMEs’ profits and sizes while taking into account any other variables that may impede the growth of such SMEs.
ESV ABU USMAN, an Estate Surveyor and Valuer, and a registered member of the Nigerian Institution of Estate Surveyors and Valuers (NIESV) sent in this piece from Abuja.