Managing Global Transitions (Dec 2015)

Correlates of Tax Compliance of Small and Medium Size Businesses in Cameroon

  • Oludele Akinloye Akinboade

Journal volume & issue
Vol. 13, no. 4
pp. 389 – 413

Abstract

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Taxation provides a predictable and stable flow of revenue to finance development objectives. This is important in a country like Cameroon that has serious challenges with meeting its development objectives. Small and medium enterprises (SMEs) are significant for economic growth in the country, contributing as much as about 22 percent of the gross domestic product. SMEs generate taxable incomes. They also collect employment and value added taxes on behalf of the government. Taxation, however, imposes high cost to small businesses. SMEs are less tax compliant in comparison to large businesses. SMEs are considered the ‘hard to tax group from the informal sector.’ As such, the literature suggests that only a fraction of their taxable incomes is reported to tax authorities. Against this background, factors that correlate with tax compliance of 575 small and medium size companies in Cameroon are discussed from a survey of companies in the manufacturing and wholesale sectors. High registration cost and time-consuming processes promote tax non-compliance. The perception that tax system is corrupt discourages registration and filing compliance. When there are too many compliance hurdles, the probability of filing compliance is reduced. However, a fair and static system encourages filing and registration compliance. A clear and consistent tax system promotes filing compliance. Authorities that understand their responsibilities and are willing to respond to enquiries during the registration process promote tax compliance in general.

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