The Effect of Tax Compliance on the Financial Sustainability of Small Businesses in Kano Municipal LGA
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- NGN 5000
Background of the Study
Tax compliance is a crucial aspect of business operations, especially for small businesses in Kano Municipal LGA, where the local economy heavily relies on SMEs. These businesses contribute significantly to employment, income generation, and economic growth. However, many small businesses in this area face challenges related to tax compliance due to factors like lack of awareness, insufficient tax education, and complex tax regulations. Non-compliance can result in legal penalties, loss of business reputation, and financial instability, which ultimately hinders their growth and sustainability. This study aims to explore how tax compliance impacts the financial sustainability of small businesses in Kano Municipal LGA, and how businesses can align their practices to ensure long-term success.
Statement of the Problem
Tax compliance is often viewed as a burden by small business owners in Kano Municipal LGA. Many businesses struggle to comply with tax regulations due to limited knowledge and understanding of the tax system. This lack of tax compliance can negatively impact financial sustainability by incurring penalties, reducing profitability, and eroding investor confidence. Despite its importance, the role of tax compliance in promoting the financial sustainability of small businesses in this region has not been adequately explored. This study seeks to evaluate the effects of tax compliance on the financial sustainability of small businesses in Kano Municipal LGA.
Aim and Objectives of the Study
1. To assess the level of tax compliance among small businesses in Kano Municipal LGA.
2. To examine the impact of tax compliance on the financial sustainability of small businesses in Kano Municipal LGA.
3. To recommend strategies for improving tax compliance among small businesses in Kano Municipal LGA to enhance their financial sustainability.
Research Questions
1. What is the level of tax compliance among small businesses in Kano Municipal LGA?
2. How does tax compliance affect the financial sustainability of small businesses in Kano Municipal LGA?
3. What strategies can small businesses adopt to improve their tax compliance and enhance their financial sustainability?
Research Hypotheses
1. H₀: There is no significant relationship between tax compliance and the financial sustainability of small businesses in Kano Municipal LGA.
2. H₀: Tax non-compliance does not significantly affect the profitability of small businesses in Kano Municipal LGA.
3. H₀: Improving tax compliance will not lead to a significant improvement in the financial sustainability of small businesses in Kano Municipal LGA.
Significance of the Study
This study will provide insights into the importance of tax compliance for small business owners in Kano Municipal LGA. It will highlight how tax compliance can improve financial stability, profitability, and long-term sustainability. The findings will also help policymakers and tax authorities design targeted strategies to improve tax education and compliance among small businesses in the region.
Scope and Limitation of the Study
The study will focus on small businesses operating in Kano Municipal LGA. Limitations include potential biases from business owners who may be reluctant to disclose information about tax compliance and financial sustainability.
Definition of Terms
• Tax Compliance: The adherence of businesses to tax laws and regulations, including timely filing of returns and payment of taxes.
• Financial Sustainability: The ability of a business to maintain profitability and operational stability over time, ensuring its long-term viability.
• Small Businesses: Enterprises that have a small workforce, relatively low revenue, and operate on a local scale, playing a significant role in the economy.
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