TAXATION AND PROFITABILITY OF SMALL-SCALE TRADERS IN CHIKUN LGA
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Background of the Study
Small-scale traders are a vital component of the informal economy in Nigeria, particularly in regions like Chikun LGA. These traders often face the challenge of balancing between paying taxes and maintaining profitability. Taxation, while important for local government revenue, can impact the financial viability of these businesses, especially when tax rates are perceived as excessive or when the tax administration is inefficient. This study aims to explore the relationship between taxation and the profitability of small-scale traders in Chikun LGA, focusing on how tax policies influence their daily operations, cost structures, and overall business outcomes.
Statement of the Problem
Small-scale traders in Chikun LGA often operate under difficult economic conditions, including limited access to finance, high operating costs, and unpredictable market conditions. Taxation, which is meant to fund public services and infrastructure, can sometimes be a burden on these traders, reducing their profit margins. The lack of proper tax policies and the administrative burden associated with tax compliance can make it harder for small-scale traders to sustain and grow their businesses. This study will examine how taxation affects the profitability of these traders and identify the specific challenges they face.
Aim and Objectives of the Study
Aim: To investigate the impact of taxation on the profitability of small-scale traders in Chikun LGA.
Objectives:
- To assess the effect of tax rates on the profitability of small-scale traders in Chikun LGA.
- To identify the key challenges faced by small-scale traders in complying with tax policies.
- To recommend tax policy reforms that could improve the profitability of small-scale traders in Chikun LGA.
Research Questions
- How do tax rates affect the profitability of small-scale traders in Chikun LGA?
- What are the major challenges faced by small-scale traders in complying with tax regulations in Chikun LGA?
- What tax policy reforms could improve the profitability and business sustainability of small-scale traders in Chikun LGA?
Research Hypothesis
- H₀: Taxation has no significant effect on the profitability of small-scale traders in Chikun LGA.
- H₀: Small-scale traders in Chikun LGA do not face significant challenges in complying with tax policies.
- H₀: Tax policy reforms will not significantly improve the profitability of small-scale traders in Chikun LGA.
Significance of the Study
This study will provide crucial insights into the relationship between taxation and the profitability of small-scale traders in Chikun LGA. The findings will be useful for local government authorities in designing tax policies that support small businesses while ensuring efficient revenue collection.
Scope and Limitation of the Study
The study will focus on small-scale traders in Chikun LGA and explore the impact of taxation on their profitability. Limitations include the potential for limited cooperation from small-scale traders regarding their financial records and possible biases in reporting tax compliance issues.
Definition of Terms
- Small-Scale Traders: Individuals or businesses involved in retail or small-scale production, often operating informally within a local market.
- Taxation: The process through which the government collects revenue from businesses and individuals to fund public expenditures.
- Profitability: The ability of a business to generate more revenue than the costs incurred in running the business.
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