EFFECT OF GOVERNMENT TAXATION ON THE GROWTH OF SMALL AND MEDIUM ENTERPRISES IN BENUE STATE, NIGERIA

Abstract

This study examined the effect of government taxation on the growth of small and medium enterprises (SMEs) in Benue State, Nigeria. Specifically, the study determined the effects of tax burden, multiple taxation and tax compliance cost on SME growth. A descriptive and correlational survey research design was adopted. The population comprised 1,640 SMEs operating in Makurdi, Gboko and Otukpo, from which a sample size of 354 SMEs was determined using Yamane’s formula. Proportionate stratified sampling was employed to ensure representation across the three towns and four broad sectors, namely trading and commerce, manufacturing and agro processing, hospitality and personal services, and professional, transport and other services. Data were collected using a structured questionnaire, with 287 completed questionnaires found usable, representing an 81.1 percent response rate. The data were analysed using descriptive statistics, Pearson Product Moment Correlation and multiple regression analysis. The findings revealed that tax burden, multiple taxation and tax compliance cost had significant negative effects on SME growth. The regression results showed that tax burden had a negative and significant effect on SME growth (β = −0.296, t = −5.519, p < 0.001). Multiple taxation also had a negative and significant effect on SME growth (β = −0.352, t = −6.549, p < 0.001), while tax compliance cost exerted a negative and significant effect (β = −0.238, t = −4.449, p < 0.001). The study concluded that excessive taxation, multiple tax obligations and the costs associated with tax compliance constrain the growth of SMEs in the selected commercial centres of Benue State. It therefore recommends that government should simplify the tax structure applicable to SMEs, eliminate overlapping tax and levy demands, and reduce the administrative and financial costs associated with tax compliance. Such measures would create a more supportive fiscal environment for SME expansion, employment generation and sustainable enterprise development.