AN EVALUATION OF HOW TAX COMPLIANCE AND ENFORCEMENT STRATEGIES AFFECT INTERNALLY GENERATED REVENUE IN CAMEROON

CHAPTER ONE INTRODUCTION 1.1 Background of the Study Across the globe, governments invest significantly in providing infrastructure and essential public services to their citizens—responsibilities that lie at the heart of governance. To meet these obligations, governments must secure substantial financial resources, and taxation stands out as the most reliable and consistent means of revenue generation (Samuel, 2015). Taxes are compulsory financial charges levied by the government on individuals, households, corporations, and other entities. These may be based on income, profit, wealth, or other financial activities. The primary purpose of taxation is to raise funds to finance public expenditures and social services. Taxation represents a strategic tool used by governments to generate the revenue needed for the development of infrastructure and delivery of essential services. It is an obligation imposed on both individuals and corporate bodies, applying to workers’ incomes, business profits, and even the cost of goods, services, and financial transactions. Taxes can stem from a wide range of income sources, including salaries, dividends, interests, capital gains, petroleum profits, and royalty payments. These payments are not tied to specific benefits but are rather mandatory contributions designed to support broader social and economic objectives (Samuel, 2015). Taxation is by no means a recent concept—it dates back to ancient civilizations. It remains central to the socio-economic development of nations, especially in developing countries, where it constitutes the primary avenue for generating revenue to fund government operations and stimulate growth. In Cameroon, effective mobilization of internally generated revenue (IGR) through taxation is critical to sustaining public services, constructing infrastructure, and addressing poverty. However, the country continues to face significant barriers to maximizing tax revenue due to issues around tax compliance and enforcement. Cameroon’s tax structure is multifaceted, encompassing income tax, value-added tax (VAT), business tax, customs duties, and several other levies. Despite having multiple streams of tax revenue, the country struggles with tax evasion, low compliance rates, and inadequate enforcement of tax laws. This situation contributes to substantial revenue loss and undermines fiscal performance. The challenges stem from weak tax administration, informal economic activities, limited enforcement capacity, tax avoidance practices, and persistent corruption. Existing literature has examined key issues related to taxation in Cameroon, particularly tax compliance and enforcement. Research by Tchakoute Patie et al. (2016) and Abanda et al. (2019) emphasizes the importance of taxpayer education, simplified tax processes, and stronger enforcement strategies in enhancing compliance and revenue generation. Similarly, Fomba Kamga et al. (2018) highlight the roles of tax morale, trust in government, and perceived fairness of the tax system in shaping taxpayer behavior. However, despite these insights, there remains a gap in empirical studies evaluating the impact of compliance and enforcement mechanisms on Cameroon’s internally generated revenue. Addressing this gap is crucial for informing better fiscal strategies. A thorough analysis of the link between tax compliance, enforcement, and domestic revenue collection can offer data-driven recommendations for improving tax administration. Given the evolving economic environment, it is vital to continuously evaluate compliance trends and enforcement approaches to ensure long-term revenue sustainability. This study, therefore, aims to contribute to this understanding by systematically examining how tax compliance and enforcement strategies affect internally generated revenue in Cameroon. By analyzing tax data, surveys, and administrative reports, the study will identify key factors that influence taxpayer behavior and assess the effectiveness of enforcement mechanisms. Ultimately, the goal is to propose policy reforms that could improve revenue performance and strengthen fiscal resilience. 1.2 Statement of the Problem There is still considerable uncertainty about how various tax policies and enforcement strategies influence Cameroon’s internally generated revenue. This study seeks to address a critical question: How do tax compliance and enforcement measures affect internal revenue generation in Cameroon? The research aims to evaluate the weaknesses in the current tax system, assess the effectiveness of existing enforcement strategies, and explore possible avenues to improve compliance. Ultimately, it seeks to provide practical insights that could help boost tax revenue for sustained economic development (Samuel, 2015). 1.3 Objectives of the Study The overarching aim of this study is to explore how tax compliance and enforcement strategies influence internally generated revenue in Cameroon. The specific objectives are to: i. Examine the level of tax compliance across different sectors in Cameroon. ii. Evaluate the effectiveness of tax enforcement strategies in promoting taxpayer compliance. iii. Investigate the relationship between tax compliance rates and the volume of internally generated revenue (IGR) in Cameroon. iv. Identify the key factors influencing tax compliance behavior among individuals and businesses in the country. 1.4 Research Questions To guide the study, the following research questions are posed: i. What is the current level of tax compliance across various sectors in Cameroon? ii. How effective are existing enforcement strategies in promoting tax compliance among Cameroonian taxpayers? iii. What is the nature of the relationship between tax compliance rates and the internally generated revenue (IGR) in Cameroon? iv. What factors drive or hinder tax compliance behavior among individuals and businesses in Cameroon? 1.5 Significance of the Study The outcomes of this study will be valuable to several stakeholders: Policymakers: The study will provide empirical insights that can inform the design and implementation of more effective tax policies and enforcement strategies. Understanding the drivers of compliance and their impact on revenue collection will help in formulating policies that optimize revenue without overburdening taxpayers. Academic Community: The research contributes to the growing body of knowledge on taxation in developing economies, particularly in sub-Saharan Africa. It offers data-driven insights and theoretical perspectives that can inform scholarly discussions and encourage further research on taxation, compliance, and revenue mobilization. 1.6 Scope of the Study This study focuses specifically on evaluating the effects of tax compliance and enforcement strategies on the internally generated revenue of Cameroon. Empirically, it will assess tax compliance levels across sectors, measure the effectiveness of enforcement strategies, explore the link between compliance rates and IGR, and analyze factors that influence taxpayer behavior within the Cameroonian context. 1.7 Limitations of the Study As with most academic efforts, this research encountered certain limitations. Financial constraints affected the researcher’s ability to access a wide range of literature, data sources, and other research materials. Limitations in funding also affected the size of the sample used in the study. Furthermore, the researcher had to balance the demands of this study with other academic responsibilities, which limited the time available for data collection and analysis. 1.8 Definition of Terms Tax Compliance: The extent to which individuals and businesses fulfill their tax obligations as prescribed by law, including accurate income reporting, timely payment, and adherence to relevant tax regulations. Enforcement Measures: These are strategies and actions implemented by tax authorities to ensure compliance with tax laws. They include audits, penalties, legal action, and other interventions aimed at curbing tax evasion and promoting adherence to tax rules. Internally Generated Revenue (IGR): Revenue collected by the government from within its jurisdiction, excluding foreign sources such as grants or loans. In this context, IGR specifically refers to income raised through tax collections within Cameroon. Tax Policies: These are the rules, regulations, and frameworks established by government authorities that govern the assessment, collection, and administration of taxes. Tax policies determine the structure of the tax system, including the types and rates of taxes, exemptions, and incentives. Revenue Mobilization: The process through which governments raise funds to finance their budgets and meet financial obligations. This includes improving tax collection mechanisms and promoting compliance among taxpayers. Economic Development: A sustained improvement in a country's economic health, including increases in income levels, employment, infrastructure, and overall quality of life. Fiscal Management: The administration of a government’s financial activities, encompassing revenue generation, budget planning, expenditure control, and debt management, aimed at achieving economic stability and efficient resource allocation. REFERENCES Tchakoute Patie, P., Tamba, J., & Tchatchouang, J. (2016). Tax Compliance and Corporate Governance. Evidence from the African Francophone Countries. Journal of International Accounting, Auditing and Taxation, 25, 1-14. Abanda, F. H., Koyeu, V. E., & Nzomo, M. (2019). Tax Compliance Determinants: Evidence from Small and Medium-sized Enterprises (SMEs) in Cameroon. International Journal of Innovation and Economic Development, 5(4), 38-46. Fomba Kamga, B., Kamga, S. F., & Kamga, A. T. (2018). Determinants of Tax Compliance Behaviour in Cameroon: Evidence from Corporate Taxpayers. International Journal of Economics, Commerce and Management, 6(4), 139-155. Samuel, K.N. (2015). The effect of enforcement measures on value added tax revenue for firms in the large corporate taxpayer category in Kenya (Master of Science in finance, school of business, university of Nairobi).