AN INVESTIGATION INTO THE BARRIERS TO ACCESSING TAX INCENTIVES BY BUSINESSES IN YAOUNDÉ, CAMEROON

CHAPTER ONE INTRODUCTION 1.1 Background of the Study In many developing countries, tax incentives are commonly used as a tool to stimulate economic growth. However, their effectiveness and value for money have long been questioned by fiscal analysts. Beyond the revenue lost, tax incentives often lead to inefficiencies in resource allocation, create administrative complexities, and open doors for corruption and rent-seeking behavior (Deloitte, 2016). Despite the limited and inconclusive empirical evidence supporting their benefits, governments continue to rely on these incentives rather than opting for direct budget expenditures to support targeted economic activities. One practical reason for this preference is that, unlike direct spending, tax incentives don’t require immediate funding from the budget, making them more politically and economically appealing (Hawksford, 2016). Given the typically low tax revenues in developing nations, governments are often constrained by tight budgets that make it difficult to adequately fund infrastructure and education. In such scenarios, offering tax breaks can be seen as an easier alternative and is often marketed as a form of “tax reduction.” A more conventional rationale for the ongoing use of tax incentives lies in their perceived role in attracting foreign investment. Governments view them as tools to lure capital and technological expertise from multinational corporations (Zolt, 2015). Although taxes are just one of many variables affecting investment decisions, authorities often favor more visible options like tax holidays over long-term efforts to improve investment conditions such as macroeconomic stability and adequate infrastructure (Hassan & Schneider, 2016). Nevertheless, research has continuously cast doubt on the true efficacy of tax incentives. Scholars emphasize the importance of a holistic approach that includes both tax-related and non-tax-related factors. In many developing countries, incentives are often deployed to offset poor investment conditions—an approach frequently criticized as a suboptimal practice (OECD, 2018), though this perspective will be challenged in this study. Additionally, the removal of legal and economic barriers to capital mobility has sparked a “race to the bottom,” where countries compete through aggressive tax cuts, sometimes to their detriment. Tax incentives can significantly influence economic behavior, drive investment, and contribute to long-term development in both developed and emerging economies (Zolt, 2015). In the case of Yaoundé, Cameroon’s capital city, the government uses tax incentives to encourage entrepreneurship, attract investment, and foster job creation. Despite the availability of multiple incentive schemes, many businesses struggle to access and fully utilize them. Yaoundé is a central hub of economic activity and administration in Cameroon, home to a wide range of businesses from small enterprises to large firms across diverse industries. These businesses play a vital role in job creation, income generation, and overall economic development (Hawksford, 2016). However, numerous challenges prevent them from taking full advantage of tax incentives. These challenges include complicated regulations, red tape, inefficiencies in tax administration, and limited knowledge or understanding of the eligibility and application processes (World Bank Group, 2021). Due to these constraints, many businesses are unable to access the tax benefits intended for them, which in turn hinders their ability to grow, invest, and create employment opportunities. The impact of tax incentives is further influenced by broader contextual factors such as macroeconomic stability, institutional capability, and regulatory strength (Bartik, 2020; Sierra-García & Martínez-Merino, 2020). To ensure that tax incentives effectively contribute to development, it is essential to consider these underlying dynamics. Given the strategic importance of tax incentives in promoting business activity, it is imperative to explore the reasons why many businesses in Yaoundé fail to access them. This research aims to identify the key challenges, limitations, and opportunities associated with tax incentives, thereby offering insights that can guide policymakers, regulatory bodies, and business stakeholders in improving access and maximizing economic benefits. 1.2 Statement of the Problem Businesses in Yaoundé, Cameroon, face considerable difficulties in accessing tax incentives that are crucial for driving economic development. Although various incentive schemes are in place to promote investment and entrepreneurship, many enterprises find it challenging to take full advantage of them. Research has consistently shown that tax incentives can significantly aid in business expansion, job creation, and economic progress (Bartik, 2020). Yet, for these incentives to work effectively, businesses must be able to navigate complex administrative and regulatory processes. In Yaoundé, ambiguity around eligibility criteria, lengthy application procedures, and inconsistent enforcement of tax laws contribute to an environment of uncertainty, making it difficult for businesses to confidently utilize these benefits. A further issue is the low level of awareness and understanding among business owners about the available tax incentives. Many are unaware of what types of incentives exist, how they qualify for them, and what benefits they offer (Cai & Liu, 2019; Sierra-García & Martínez-Merino, 2020). This knowledge gap compounds the existing problems and limits the potential impact of these policies. Administrative and bureaucratic inefficiencies also serve as major obstacles. Complicated tax laws, tedious registration procedures, and inconsistent application of rules make the system intimidating and difficult, especially for small and medium-sized enterprises (SMEs) that lack the resources to hire tax professionals. These issues highlight the urgent need to examine the barriers preventing businesses in Yaoundé from accessing tax incentives. Understanding the root causes and identifying ways to overcome them will allow policymakers and business leaders to design better systems that truly support economic growth in the region. Therefore, this study aims to investigate the key factors that limit access to tax incentives for businesses in Yaoundé, Cameroon. 1.3 Objective of the Study The primary aim of this study is to explore the factors that hinder businesses in Yaoundé, Cameroon, from accessing tax incentives. The specific objectives include: i.To assess the level of awareness of tax incentives among businesses in Yaoundé. ii.To identify the key factors that contribute to limited access to tax incentives. iii.To recommend strategies that could improve access to and utilization of tax incentives by businesses in Yaoundé. 1.4 Research Questions This study will seek to answer the following research questions: i.What is the level of awareness of tax incentives among businesses in Yaoundé? ii.What are the key factors that contribute to limited access to tax incentives? iii.What are the recommended strategies that could improve access to and utilization of tax incentives by businesses in Yaoundé? 1.5 Significance of the Study The findings of this research are expected to offer valuable insights for various stakeholders: Policymakers: By identifying the specific challenges businesses face when trying to access tax incentives, the study can help inform better policy design. Recommendations from the research can be used to simplify administrative procedures, refine regulatory frameworks, and implement more effective tax incentive programs. This will ultimately support business expansion, attract investment, and promote economic growth in Yaoundé and beyond. Academic Research: The study will contribute to the growing body of academic literature on taxation, economic policy, and business development in emerging economies. It offers empirical evidence specific to the Cameroonian context, thus enriching scholarly debates and paving the way for future studies. 1.6 Scope of the Study This study focuses on the barriers that limit access to tax incentives among businesses located in Yaoundé, Cameroon. The research will empirically assess the level of awareness of tax incentives among businesses in Yaoundé, identify the key factors that contribute to limited access to tax incentives and recommend strategies that could improve access to and utilization of tax incentives by businesses in Yaoundé. 1.7 Limitations of the Study As with any academic research, this study faced a few limitations. Financial constraints restricted the researcher’s ability to access extensive resources and collect data on a large scale, which influenced the choice of a more manageable sample size. Additionally, balancing this research with other academic responsibilities reduced the time available for deeper investigation and data analysis. 1.8 Definition of Terms Tax Incentives: These are special provisions within the tax system intended to encourage specific economic behaviors by reducing the tax obligations of individuals or businesses. They can take forms such as tax credits, exemptions, deductions, or reduced tax rates, typically aimed at fostering investment, job creation, or regional development. Access: In this context, access refers to the ability of businesses to successfully identify, understand, and benefit from available tax incentives. This includes awareness, knowledge of eligibility criteria, ease of application, and the ability to overcome administrative barriers. Factors Limiting Access: This term refers to any challenges or barriers that prevent businesses from fully utilizing tax incentives. These can include legal, bureaucratic, informational, or institutional factors that complicate the incentive process. Businesses: For the purposes of this study, businesses include all entities involved in commercial activities within Yaoundé—ranging from sole proprietorships and SMEs to larger corporations—across various sectors of the economy. REFERENCES Bartik, T. J. (2020). 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