AN INVESTIGATION INTO THE REGULATORY FRAMEWORK OF PERSONAL INCOME TAX IN CAMEROON

CHAPTER ONE INTRODUCTION 1.1 Background of the Study Taxation forms the financial backbone of most economies around the world, whether developed or developing. It serves as a dependable mechanism through which governments raise revenue to sustain and grow their economies. As Eniola and Entebang (2015) observed, tax revenue plays a fundamental role in supporting developmental efforts in less economically advanced nations. Across the globe, countries adopt diverse fiscal policies that empower them to impose various types of taxes on their citizens to generate income and enhance economic performance (Gupta & Sawyer, 2015). In a similar fashion, the Nigerian government, like many others, exercises its constitutional right to implement various tax systems on its population. Likewise, the Gombe State government possesses the authority to impose taxes at any given rate, all in an effort to increase revenue collection (Ngong, 2015). As earlier emphasized, the primary purpose of taxation is to raise the necessary funds to cover government expenditures, provide essential public services, and improve the overall welfare of the people. Taxes also serve as a strategic economic tool that can be used to either encourage or discourage specific economic and social behaviors. Moreover, taxation can help governments achieve certain economic objectives, enhance the gross domestic product (GDP), foster economic development, and influence the balance of payments in international trade (Carnahan, 2015). Personal income tax is one of the most critical components of fiscal policy in many countries, acting as a key source of government revenue. In Cameroon, personal income tax significantly contributes to public expenditure, supports social welfare programs, and stimulates economic growth. However, the effectiveness and operational efficiency of personal income tax laws in Cameroon continue to face various challenges. In recent years, there have been major reforms in the Cameroonian tax system aimed at modernizing tax administration, enhancing compliance, and aligning with international best practices (Devarajappa, 2017). These reforms have been influenced by both internal economic realities and external commitments to institutions like the International Monetary Fund (IMF) and the World Bank. Despite these reforms, certain issues persist within Cameroon’s personal income tax framework. The complexity and ambiguity of some tax laws can lead to non-compliance and erode the trust of taxpayers (Kalpana, 2016). Concerns also remain regarding the fairness of the system, as some segments of the population may bear an undue tax burden while others benefit disproportionately. Furthermore, administrative inefficiencies—such as tax evasion, poor enforcement, and bureaucratic delays—pose serious challenges to effective tax administration. These issues not only impede revenue generation but also affect the government’s ability to deliver essential services and invest in infrastructure. Additionally, the broader impact of personal income tax regulations on economic development is a subject of increasing interest (Gooch & Williams, 2015). Excessive tax rates, poorly designed incentives, and inconsistent enforcement can stifle investment, discourage entrepreneurship, and limit innovation—ultimately slowing down economic progress. In today’s globalized world, it is essential for Cameroon’s tax policies to meet international standards in order to remain competitive and attract foreign direct investment. Failure to do so may result in capital flight, declining investor confidence, and restricted economic opportunities. Given the importance of personal income tax to Cameroon’s economic sustainability, it is necessary to carry out in-depth research to address these challenges (Forstater, 2018). A clear understanding of the intricacies, consequences, and potential areas for reform in tax policy will enable policymakers to devise strategies that boost revenue, enhance fairness, and foster long-term economic growth. Consequently, this study sets out to examine the current state of personal income tax regulations in Cameroon. 1.2 Statement of the Problem Like many nations, Cameroon relies heavily on personal income tax as a vital source of revenue for public expenditure. However, the current structure and implementation of personal income tax laws in the country face a range of issues that could compromise their effectiveness, equity, and overall efficiency. Although these laws play an essential role in Cameroon’s fiscal policy, there remains a limited understanding of their complexity, practical enforcement, and the wider implications for individuals and the economy at large (Forstater, 2018). One key issue is the overly complicated nature of the tax code, which may cause confusion among taxpayers and hamper compliance efforts. The assessment process may also lack the transparency required for citizens to fully grasp their tax obligations. Questions regarding the fairness of the current system continue to arise, especially when certain social or occupational groups appear to either bear a disproportionate burden or benefit from loopholes in the law, leading to unequal treatment (Eniola & Entebang, 2015). Moreover, administrative weaknesses within the tax authorities remain a concern. Tax evasion, lack of robust enforcement mechanisms, and procedural bottlenecks reduce the ability of the government to effectively implement tax laws. These inefficiencies not only restrict revenue inflow but also hinder the government's capacity to finance critical services and infrastructure. In addition, the current tax regime may unintentionally stifle economic growth. Excessively high tax rates or poorly crafted tax incentives can deter business investment, reduce productivity, and discourage innovation—thereby hindering national development (Eniola & Entebang, 2015). For Cameroon to stay competitive in the global market and attract external investment, its personal income tax regulations must align with international standards. Falling short of this could trigger capital flight, reduce investor trust, and slow economic momentum. Addressing these challenges is essential for enhancing the fairness, functionality, and efficiency of Cameroon’s personal income tax system. This will ultimately contribute to long-term economic development and fiscal sustainability. Thus, the study aims to evaluate personal income tax laws in Cameroon and recommend appropriate solutions. 1.3 Objectives of the Study The general aim of this study is to evaluate the personal income tax regulations in Cameroon. Specifically, the study seeks to: i. Examine the compliance behavior of individual taxpayers regarding personal income tax in Cameroon. ii. Evaluate the implications of personal income tax laws within the Cameroonian context. iii. Identify the challenges tax authorities face in enforcing personal income tax regulations. iv. Understand how taxpayers perceive the current personal income tax regulations in Cameroon. 1.4 Research Questions The following research questions guide the study: i. What is the nature of compliance behavior among individual taxpayers concerning personal income tax in Cameroon? ii. What are the implications of existing personal income tax laws in Cameroon? iii. What challenges do tax administrators face in implementing personal income tax policies? iv. How do taxpayers perceive personal income tax regulations in Cameroon? 1.5 Significance of the Study This research will be beneficial to various stakeholders: Policymakers: The findings will help policymakers identify critical gaps and inefficiencies in the current tax system. Insights from the study can support the design of better-informed reforms that promote fairness, improve compliance, and enhance tax collection mechanisms. Ministry of Taxation: The study will aid in developing more effective administrative frameworks for managing and enforcing tax regulations. Academic Community: The research will add valuable knowledge to the academic field, especially for scholars and students exploring taxation and public finance. It may also serve as a foundation for future studies. 1.6 Scope of the Study This study centers on personal income tax regulations in Cameroon. It focuses on analyzing individual taxpayers' compliance behavior, examining the broader implications of tax laws, identifying enforcement challenges faced by tax authorities, and exploring public perception of the personal income tax system. 1.7 Limitations of the Study As with most research efforts, this study encountered a few challenges. Limited financial resources affected the researcher’s ability to access all necessary materials, literature, and data collection tools (such as internet access, printing of questionnaires, and conducting interviews). This constraint influenced the decision to adopt a moderate sample size. Additionally, the researcher had to balance this project with other academic responsibilities, which reduced the amount of time available for in-depth exploration. 1.8 Definition of Terms Personal Income Tax: A direct levy on individual earnings, including wages, salaries, dividends, and other income sources, calculated according to existing laws and tax brackets. Tax Regulations: A collection of legal provisions, guidelines, and rules that govern how taxes are assessed, collected, and administered by tax authorities. Equity: The principle of fairness in tax distribution, ensuring taxpayers contribute according to their financial capabilities to promote social justice and reduce inequality. Tax Compliance: The degree to which taxpayers fulfill their legal obligations, such as filing returns, reporting income truthfully, and paying taxes on time. Tax Evasion: Illegal efforts to avoid paying taxes, including underreporting income, inflating deductions, or hiding assets, often resulting in legal penalties. REFERENCES Eniola, A &Entebang, H, (2015b). “SME Firm Performance-financial Innovation and Challenges‟‟. Procedia -Social and Behavioral Sciences, 195, 334-342. Gupta R & Sawyer, A, (2015). “Tax Compliance Costs for Small Businesses in New Zealand‟‟: Some Recent Findings. Australian Tax Forum. Ngong C, (2015). “The Effects of Taxes on the Performance of Micro Enterprises”, Buea,August 2015. Carnahan, M. (2015). Taxation Challenges in Developing Countries. Asia & the Pacific Policy Studies, Vol. 2, No. 1, pp. 169–182 doi: 10.1002/app5.70. Devarajappa, S. (2017) Tax evasion in India: A study of its impact on revenue of the government, EPRA International Journal of Economic and Business Review, Vol. 5, No. 9. Kalpana, V., (2016). Tax evasion - a major threat to economic development and growth - causes and remedies. 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