The Effect of Multiple Taxation on the Financial Performance of Nigerian SMEs: A Study of Small Businesses in Port Harcourt
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Background of the Study
Small and Medium Enterprises (SMEs) are the backbone of Nigeria’s economy, contributing significantly to employment generation and GDP. However, the proliferation of taxes at the federal, state, and local government levels has placed a heavy burden on SMEs. Multiple taxation, characterized by overlapping tax demands, often leads to reduced profitability and stunted business growth (Eze & Omololu, 2023).
Port Harcourt, as a commercial hub in Nigeria, is home to a vibrant SME sector. However, SMEs in the city face challenges such as high tax rates, duplication of taxes, and an opaque tax system. These challenges not only affect their financial performance but also discourage compliance and hinder long-term sustainability (Chukwu & Adebayo, 2024).
This study investigates the impact of multiple taxation on the financial performance of SMEs in Port Harcourt, exploring its implications for profitability, business growth, and compliance.
Statement of the Problem
Multiple taxation has been identified as a critical issue facing SMEs in Nigeria, contributing to high operational costs and reduced financial performance. SMEs in Port Harcourt, in particular, report challenges such as double taxation, lack of clarity in tax administration, and harassment by tax officials (Okonkwo & Abiola, 2025). These issues lead to decreased profitability, limited reinvestment opportunities, and, in extreme cases, business closures.
Despite the importance of SMEs to the Nigerian economy, there is limited empirical research on the specific effects of multiple taxation on their financial performance. This study aims to fill this gap by examining the experiences of small businesses in Port Harcourt.
Objectives of the Study
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To assess the impact of multiple taxation on the profitability of SMEs in Port Harcourt.
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To identify challenges faced by SMEs in complying with multiple taxation.
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To evaluate the effect of multiple taxation on the growth and sustainability of SMEs in Port Harcourt.
Research Questions
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What is the impact of multiple taxation on the profitability of SMEs in Port Harcourt?
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What challenges do SMEs face in complying with multiple taxation?
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How does multiple taxation affect the growth and sustainability of SMEs in Port Harcourt?
Research Hypotheses
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Multiple taxation does not significantly affect the profitability of SMEs in Port Harcourt.
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Challenges in complying with multiple taxation do not significantly impact SMEs in Port Harcourt.
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Multiple taxation does not significantly affect the growth and sustainability of SMEs in Port Harcourt.
Scope and Limitations of the Study
The study focuses on the effect of multiple taxation on SMEs in Port Harcourt from 2015 to 2024. While the findings provide insights into taxation issues within the SME sector, they may not be generalizable to larger businesses or other regions in Nigeria. Data collection challenges, such as limited access to financial records, may also constrain the study.
Definitions of Terms
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Multiple Taxation: The imposition of overlapping taxes by different levels of government on the same income or business activity.
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SMEs: Small and Medium Enterprises, defined by their size, turnover, and employee numbers, playing a critical role in economic development.
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Financial Performance: The measure of a business’s profitability, efficiency, and overall financial health.
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