ASSESSING THE ISSUES HINDERING TAX COMPLIANCE AMONG SMALL AND MEDIUM ENTERPRISES IN EYUMOJOCK, CAMEROON

CHAPTER ONE INTRODUCTION 1.1 Background of the Study The practice of taxation has existed since ancient civilizations, with one of the earliest known tax systems recorded between 3000 and 2800 BC during the early rule of ancient Egypt (Adeoti, 2020). Taxes are mandatory levies imposed by governments on individuals, businesses, and corporations, typically on income and assets. These payments are made without any direct or immediate return of benefits to the taxpayer (Cornelius, Ogar & Okar, 2016). Taxation is a cornerstone for national development, particularly in developing and transitional economies where it plays a critical role in driving socio-economic progress (Ocran & Affum-Osei, 2016). Despite this importance, countries like Nigeria continue to grapple with widespread tax non-compliance, compelling the government to explore various strategies to improve tax revenue collection and thereby support fiscal and monetary policy execution (Aladejebi, 2018). Similarly, Small and Medium Enterprises (SMEs) significantly contribute to the local economy of Eyumojock, Cameroon. These businesses are vital to job creation, innovation, and overall economic development. They operate across diverse sectors including agriculture, manufacturing, and services, playing a major role in poverty reduction and wealth creation within the community. However, despite their importance, SMEs in Eyumojock face a range of challenges, particularly regarding compliance with tax regulations (Linda, 2020). Ensuring that these enterprises comply with tax obligations is essential for maintaining government revenue, funding public infrastructure, and promoting sustainable economic growth. Yet, SMEs often struggle with fulfilling tax responsibilities due to several constraints. These include complex tax laws, limited knowledge of tax obligations, financial challenges, informal operational structures, and weaknesses within the tax administration system (Linda, 2020). The situation in Eyumojock mirrors the broader realities observed across many developing countries, where SMEs frequently find it difficult to adhere to tax policies because of a mixture of legislative hurdles, economic constraints, and socio-cultural factors. Studies from various contexts stress the importance of addressing these issues in order to create a fair and efficient tax system, encourage the growth and sustainability of SMEs, and ensure a balanced distribution of tax responsibilities (Linda, 2020). Although the importance of tax compliance among SMEs is widely acknowledged, there is a noticeable gap in empirical research specifically focusing on the challenges faced by these businesses in Eyumojock, Cameroon. Understanding the unique tax compliance issues confronting SMEs in this area is critical for crafting targeted policies and support mechanisms. These efforts would help SMEs fulfill their regulatory duties and maximize their contributions to the local economy (Linda, 2020). As such, this study seeks to fill that gap by exploring the barriers that SMEs in Eyumojock face in complying with tax regulations. By investigating these specific challenges and their broader implications, the study aims to offer meaningful insights to policymakers, tax authorities, and other stakeholders. Ultimately, addressing the root causes of tax compliance challenges could foster a supportive environment for SMEs to thrive, promote lasting economic development, and ensure the effective use of tax revenues for the benefit of the community. Therefore, this research investigates the challenges of tax compliance among SMEs, using Eyumojock, Cameroon as a case study. 1.2 Statement of the Problem Small and Medium Enterprises (SMEs) are essential drivers of economic growth in Eyumojock, Cameroon. They contribute significantly to job creation, innovation, and the generation of local wealth. However, these enterprises face persistent challenges in meeting tax compliance requirements. These difficulties hinder their full participation in the formal economy and limit the government's ability to mobilize revenue effectively (Adnan & Rahman, 2019). Although taxation is critical for sustainable national development, SMEs encounter numerous obstacles that affect their ability to fulfill their tax obligations. Understanding the specific compliance issues these enterprises face is a key concern. These challenges include complicated tax laws, low awareness and understanding of tax duties, limited financial capacity, ineffective tax enforcement and administration, the prevalence of informal business practices, and a lack of trust in the tax system (Hashim, Khan & Hassan, 2021). Cultural and social norms may also shape SMEs' attitudes and behaviors toward tax compliance. Furthermore, the exact effects of these compliance challenges on the operational efficiency, growth, and long-term sustainability of SMEs in Eyumojock remain unclear (Mwita, 2020). When SMEs fail to meet tax obligations, they expose themselves to financial and legal risks while also undermining government revenue efforts, which ultimately impacts public service delivery and infrastructure development in the region. This study therefore aims to investigate the challenges of tax compliance among Small and Medium Enterprises (SMEs), with Eyumojock, Cameroon serving as the case study. 1.3 Objective of the Study The general objective of this study is to examine the challenges affecting 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 key 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. Recommend strategies to improve tax compliance among SMEs in Eyumojock, Cameroon. 1.4 Research Questions The study aims to answer the following research questions: i. What is the level of tax compliance among Small and Medium Enterprises (SMEs) in Eyumojock, Cameroon? ii. What factors contribute to tax compliance challenges faced by SMEs 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 Eyumojock? 1.5 Significance of the Study This study holds relevance for several stakeholders: Policymakers and Tax Authorities: The insights provided by this research can help government officials and regulatory agencies better understand the specific tax compliance challenges faced by SMEs. This knowledge can be used to develop tailored policies, reforms, and support mechanisms to foster an environment that encourages compliance and facilitates SME growth. Academic Community: The research contributes to the existing body of literature on tax compliance, especially in the context of Eyumojock, Cameroon. By offering empirical data on the local tax compliance landscape, the study provides a valuable reference for future academic research and discourse on SME taxation in developing regions. 1.6 Scope of the Study This study focuses on investigating the challenges that hinder tax compliance among Small and Medium Enterprises (SMEs) in Eyumojock, Cameroon. Specifically, it evaluates the level of compliance, explores the contributing factors to tax challenges, examines the effects of compliance on financial performance, and proposes strategies to enhance adherence to tax regulations. 1.7 Limitations of the Study As with most academic research, this study faced a few constraints. Limited financial resources affected the researcher’s ability to access some materials, conduct extensive fieldwork, and carry out broader data collection efforts through the internet, surveys, and interviews. Additionally, the researcher had to manage time between this project and other academic responsibilities, which reduced the amount of time available for deeper investigation. As a result, a moderate sample size was selected to ensure feasibility. 1.8 Definition of Terms Small and Medium Enterprises (SMEs): These are businesses characterized by a relatively small number of employees and lower turnover compared to large corporations. While definitions vary by region or industry, SMEs typically operate with limited resources across sectors such as manufacturing, agriculture, and services. Tax Compliance: This refers to the act of adhering to the tax laws and regulations applicable in a specific jurisdiction. It involves accurately declaring income, calculating and paying taxes due, filing timely tax returns, and maintaining necessary documentation. Tax Regulations: These are the official rules, laws, and administrative procedures put in place by government authorities to guide the imposition and collection of taxes. They define taxpayers’ obligations and the penalties for non-compliance. Tax Obligations: These refer to the legal responsibilities imposed on individuals and businesses to pay various types of taxes, including income tax, sales tax, property tax, VAT, and others based on their income or activities. Tax Administration: This includes all activities carried out by tax authorities to ensure the enforcement of tax laws. It encompasses processes like taxpayer registration, assessment, collection, auditing, taxpayer education, and the application of penalties when necessary. 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. International Journal of Economics, Business and Management Research, 4(12), 73-89. Ocran, M. K., & Affum-Osei, E. (2016). Tax compliance costs of small and medium enterprises in Ghana. 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