A STUDY ON THE EFFECT OF TAXATION ON CAMEROON’S ECONOMIC DEVELOPMENT: A CASE ANALYSIS OF DJOUM MUNICIPALITY

CHAPTER ONE INTRODUCTION 1.1 Background of the Study In today’s globalised world, governments require effective redistribution mechanisms to fulfill their core responsibilities. Public expenditure—a key tool for economic policy—relies heavily on funding, with tax revenues typically representing the largest share of national income. However, the structure, design, exemptions, and surcharges within tax systems continue to spark debates among economists, professionals across various sectors, and the general public (Nkemnkeng. 2016). These debates reflect the wide variations in tax systems across countries, shaped by national priorities and conditions. Currently, several industrialised countries in the OECD are grappling with severe budgetary crises. These fiscal challenges are making it increasingly difficult for such nations to manage both short- and long-term debt obligations. As a result, governments are under pressure from financial markets to cut public spending and optimize fiscal management. Typically, this fiscal adjustment is pursued through two main channels: reducing government spending and increasing tax revenue (Nkemnkeng. 2016). The overall aim is to uphold fiscal responsibility while accelerating economic recovery. Different approaches to tax system development in industrialised countries underscore the crucial relationship between tax burdens and economic growth—a central concern for economic policymakers. This study seeks to explore how different types of taxes influence economic development, using regression analysis applied to OECD countries from 2000 to 2011. The analysis is based on the expanded neoclassical growth model proposed by Mankiw, Romer, and Weil in 1992(Njoya, 2017). When examining the role of taxation in economic growth, it is not sufficient to consider statutory tax rates alone, as these rates may not accurately represent the real tax burden experienced by taxpayers. Taxation plays a vital role in shaping fiscal policy and governance in both developed and developing economies. In the case of Cameroon—a Central African country striving for sustainable growth—understanding the complexity and impact of its tax system is crucial(Njoya, 2017) . Cameroon’s tax framework is multifaceted, involving various types of taxes at national, regional, and local levels. How these taxes are structured and implemented significantly affects economic behavior, investment decisions, and developmental outcomes. Despite this, there is a noticeable lack of empirical research examining the direct link between taxation and economic development in Cameroon, particularly at the municipal level( IFPRI, 2020). Localities like Djoum reflect the broader national economic environment in microcosm. Understanding how taxation influences development in such communities can provide valuable insights into both challenges and opportunities at the local level. These insights can guide more targeted policy strategies. Most existing studies on taxation and development focus on global trends and give less attention to the unique experiences of individual nations, especially in sub-Saharan Africa(Glover, 2020) . This points to the need for more focused empirical studies that explore how taxation specifically affects economic development in Cameroon. This study aims to fill that gap by combining theoretical perspectives with empirical analysis, focusing on the municipality of Djoum. It aspires to contribute meaningfully to academic discourse and policymaking by offering insights relevant to stakeholders such as government officials, scholars, and development practitioners. The overarching goal is to assess the role of taxation in shaping economic development in Cameroon, with Djoum municipal as a case study. 1.2 Statement of the Problem Taxation is a central pillar in shaping the economic structure of nations. For Cameroon—a country committed to achieving long-term economic growth—it is vital to understand how taxation affects development. Despite the importance of taxation, limited research exists that examines its specific impact on economic growth, particularly at the municipal level. This study, therefore, seeks to assess the role of taxation in the economic development of Cameroon, using Djoum municipal as a case study. 1.3 Objective of the Study The broad aim of this study is to evaluate the impact of taxation on the economic development of Cameroon, using Djoum municipal as a case in point. The specific objectives are: i. To identify and describe the various types of taxes implemented in Cameroon. ii. To examine the effect of taxation on the economic development of Cameroon. iii. To evaluate how tax enforcement mechanisms influence economic development in Djoum municipality, Cameroon. 1.4 Research Questions This study is guided by the following research questions: i. What are the different types of taxes implemented in Cameroon? ii. How does taxation affect the economic development of Cameroon? iii. What role do tax enforcement mechanisms play in stimulating economic development in Djoum municipality? 1.5 Research Hypotheses To further steer the research, the following hypotheses are proposed: H₀: Taxation does not significantly impact the economic development of Cameroon. H₁: Taxation has a significant impact on the economic development of Cameroon. 1.6 Significance of the Study This research is expected to be valuable to the following groups: Policymakers: The findings will offer evidence-based insights into the relationship between taxation and economic development at the local level. Such information can inform the design and implementation of tax policies that aim to promote sustainable economic growth, improve revenue generation, and enhance development outcomes across Cameroon. Academic Community: The study will add to the existing body of knowledge on taxation and development, especially in the context of sub-Saharan Africa. Through a focused case study, it will contribute theoretical insights and empirical evidence that can support future research and scholarly dialogue. 1.7 Scope of the Study This research focuses on the impact of taxation on economic development in Cameroon, with Djoum municipal serving as the case study. Empirically, the study will explore the types of taxes administered, evaluate their effect on the national economy, and assess how tax enforcement contributes to local economic development. Geographically, the study is limited to Djoum municipality. 1.8 Limitations of the Study As with most academic efforts, this research encountered a few limitations. Financial constraints posed a challenge in accessing comprehensive literature and conducting wide-ranging data collection through online resources, questionnaires, and interviews. Consequently, a moderate sample size was used. Additionally, the researcher had to balance this study with other academic responsibilities, which limited the amount of time available for in-depth research. 1.9 Definition of Terms Taxation: The process by which a government raises revenue by imposing levies on individuals, businesses, or transactions. This typically includes income tax, consumption tax, property tax, and other forms of taxation. Economic Development: A sustained process involving policies and actions aimed at improving the economic well-being and quality of life within a community or country, often reflected in increased productivity, higher income levels, employment opportunities, and overall societal progress. REFERENCES Bird, R. M., & Zolt, E. M. (Eds.). (2018). Taxation and Development: The Weakest Link?. Brookings Institution Press. Martinez-Vazquez, J., & Vaillancourt, F. (Eds.). (2017). Experiences of Tax Reform in Developing Countries. Routledge. Tait, A. A. (2017). Value Added Tax: International Practice and Problems. Cambridge University Press. Chigbu, E. E. &Njoku, C. O. (2015).“Taxation and the Nigerian economy (1994-2012)”.Management Studies and Economic Systems, 2 (2), 111-128. Hannafi, K, (2016). Macroeconomics II: Federal University BirninKebbi. Eco303course material, pp 3-4. 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