A STUDY ON THE DIFFICULTIES FACED BY SMALL AND MEDIUM ENTERPRISES (SMEs) IN MEETING TAX COMPLIANCE REQUIREMENTS: A CASE STUDY OF EYUMOJOCK, CAMEROON

CHAPTER ONE INTRODUCTION 1.1 Background of the Study The practice of taxation dates back to ancient civilizations, with the earliest recorded tax systems emerging around 3000–2800 BC in ancient Egypt during the first dynasty (Adeoti, 2020). Taxes are mandatory levies imposed by the government on individuals, businesses, and organizations, based on their income or assets. Taxpayers are typically not entitled to receive direct or immediate benefits in return (Cornelius, Ogar & Okar, 2016). Taxation plays a crucial role in national development, particularly in developing and transitioning economies (Ocran & Affum-Osei, 2016). Despite its importance, Nigeria struggles with widespread tax evasion and noncompliance, which has led the government to explore various methods to increase tax revenue in support of its fiscal and monetary objectives (Aladejebi, 2018). In Eyumojock, Cameroon, Small and Medium Enterprises (SMEs) form a vital part of the local economy, contributing significantly to job creation, innovation, and socio-economic progress. These businesses operate across sectors such as agriculture, services, and manufacturing, and are instrumental in alleviating poverty and promoting wealth creation in the region. However, despite their importance, SMEs in Eyumojock face significant challenges in complying with tax regulations (Linda, 2020). Encouraging tax compliance among these businesses is essential to ensure sustainable government revenue, support public services, and foster overall economic development. Yet, SMEs often encounter numerous obstacles that hinder their ability to comply with tax laws. These include complicated tax codes, limited knowledge and awareness of tax duties, financial constraints, informal business practices, and weaknesses in tax administration and enforcement (Linda, 2020). The situation in Eyumojock mirrors trends seen across developing nations, where SMEs frequently struggle with tax compliance due to a blend of regulatory, financial, and cultural factors. Research in various contexts has highlighted the importance of addressing these challenges in order to build a fair, efficient, and inclusive tax system that supports SME growth and ensures equitable distribution of tax responsibilities (Linda, 2020). Although there is a general recognition of the need for tax compliance among SMEs, there is a lack of empirical studies specifically focused on this issue in the context of Eyumojock. Understanding the unique challenges faced by SMEs in this area is essential for designing effective policy responses and interventions that support compliance and enhance their contribution to the local economy (Linda, 2020). This study therefore aims to fill that gap by exploring the challenges hindering tax compliance among SMEs in Eyumojock, Cameroon. It intends to offer valuable insights for policymakers, tax authorities, and other stakeholders by examining the specific issues affecting compliance, their broader implications for SMEs and the economy, and potential strategies for reform. Addressing these challenges will not only foster a more favorable business environment but also improve revenue mobilization and contribute to sustainable development in Eyumojock. Consequently, the researcher is motivated to investigate the challenges surrounding tax compliance among SMEs in Eyumojock, Cameroon. 1.2 Statement of the Problem Small and Medium Enterprises (SMEs) play a major role in driving economic development in Eyumojock, Cameroon. They contribute to employment, stimulate innovation, and generate income. However, these businesses face notable challenges in complying with tax laws, which hinders their integration into the formal economy and limits the government's ability to raise revenue (Adnan & Rahman, 2019). While tax revenue is vital for sustainable national growth, many SMEs in Eyumojock struggle to meet their tax obligations. The key concern lies in identifying the specific challenges these businesses face when trying to comply with tax laws. These issues range from complex tax procedures and inadequate knowledge of tax requirements to limited financial resources, inefficient tax administration, informal business operations, and a general lack of trust in the taxation system (Hashim, Khan & Hassan, 2021). Additionally, cultural and societal norms may influence the behavior and perception of SMEs toward tax compliance. The extent to which these issues affect the operations, growth, and sustainability of SMEs remains unclear (Mwita, 2020). Noncompliance with tax laws not only exposes these businesses to financial and legal risks but also undermines the government’s efforts to generate sufficient tax revenue for funding public infrastructure and services in Eyumojock. As such, this study aims to investigate the challenges affecting tax compliance among SMEs in Eyumojock, Cameroon. 1.3 Objective of the Study The main objective of this study is to examine the challenges of tax compliance among Small and Medium Enterprises (SMEs) in Eyumojock, Cameroon. The specific objectives are to: i. Assess the level of tax compliance among SMEs in Eyumojock, Cameroon. ii. Identify the factors contributing to tax compliance challenges among SMEs in the region. iii. Evaluate the impact of tax compliance on the financial performance of SMEs in Eyumojock. iv. Suggest practical strategies to improve tax compliance among SMEs in Eyumojock, Cameroon. 1.4 Research Questions The study will seek answers to the following research questions: i. What is the level of tax compliance among SMEs in Eyumojock, Cameroon? ii. What factors contribute to the challenges SMEs face in complying with tax regulations in Eyumojock? iii. How does tax compliance affect the financial performance of SMEs in Eyumojock? iv. What strategies can be implemented to enhance tax compliance among SMEs in the region? 1.5 Significance of the Study The findings from this research will benefit the following groups: Policymakers: This study will provide vital information to policymakers, tax authorities, and government institutions regarding the specific obstacles SMEs encounter in meeting tax requirements. These insights can guide the creation of more targeted policies and reforms that improve tax compliance within the SME sector. Academic Community: The research will add to existing knowledge on SME tax compliance, with a focus on the context of Eyumojock, Cameroon. It will serve as a valuable resource for future studies and academic discourse on taxation and small business development in developing regions. 1.6 Scope of the Study This study is centered on examining the challenges related to tax compliance among Small and Medium Enterprises (SMEs) in Eyumojock, Cameroon. It will specifically assess the level of tax compliance among SMEs, identify the key factors influencing non-compliance, analyze the effects of tax compliance on SME financial performance, and propose appropriate solutions for improving compliance in the region. 1.7 Limitations of the Study As with any research, there were a few limitations encountered. Financial constraints posed a challenge to accessing relevant literature, resources, and data collection tools such as internet services, questionnaires, and interviews. Consequently, the researcher opted for a manageable sample size. Additionally, balancing academic responsibilities with the demands of conducting this study limited the amount of time available for deeper investigation. 1.8 Definition of Terms Small and Medium Enterprises (SMEs): These are businesses with relatively small workforce sizes or revenue compared to larger corporations. Definitions vary by country, but SMEs usually operate in sectors like agriculture, manufacturing, and services, and often have limited capital and resources. Tax Compliance: This refers to how well individuals or businesses adhere to tax laws. It includes correctly declaring income, paying the right amount of tax, filing returns on time, and keeping accurate records as required by the tax authorities. Tax Regulations: These are the rules and legal guidelines set by government institutions to govern how taxes are assessed, collected, and enforced. They outline the duties of taxpayers and the consequences for noncompliance. Tax Obligations: This term covers the legal responsibilities that individuals or businesses have in terms of paying taxes. It includes income tax, VAT, property tax, and other levies imposed based on economic activities. Tax Administration: This involves the system and processes used by government bodies to manage and enforce tax laws. It includes activities like taxpayer registration, audits, payment collection, providing taxpayer assistance, and enforcing penalties. REFERENCES Adnan, A. H. M., & Rahman, M. M. (2019). Tax compliance and SMEs: A study on the determinants of tax compliance in Bangladesh. Journal of Financial Crime, 26(2), 510-526. Hashim, M., Khan, A. U., & Hassan, S. (2021). Determinants of tax compliance behavior among small and medium-sized enterprises in Malaysia. Journal of Asia Business Studies, 15(1), 80-97. Mwita, E. M. (2020). Tax compliance challenges facing Small and Medium Enterprises (SMEs) in Tanzania: A case of Kinondoni municipality. 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