The Role of Taxation in Small Business Growth: A Study of Traders in Gombe State
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Background of the Study
Taxation plays a crucial role in the economic development of a country by contributing to government revenue, which is used to finance public services and infrastructure. For small businesses, including traders in Gombe State, taxes can represent both a challenge and an opportunity. On one hand, tax obligations can strain limited financial resources, especially for small businesses that may already be facing financial difficulties due to competition, poor infrastructure, and access to capital (Aminu & Mohammed, 2023). On the other hand, proper tax compliance can improve a business’s reputation, allowing it access to government contracts, financial support, and other benefits aimed at fostering growth.
In Gombe State, small businesses, particularly traders, contribute significantly to the local economy by providing employment and goods or services that meet community needs. However, the role of taxation in these businesses' growth remains under-explored. Many small business owners in Gombe State face challenges in understanding the complexities of tax regulations and how they can leverage taxation for growth. Tax compliance is often perceived as burdensome, and this can discourage traders from adhering to tax laws, thereby hindering their ability to benefit from government support initiatives (Baba & Lawal, 2024). This study seeks to examine the relationship between taxation and small business growth, focusing on how traders in Gombe State manage their tax responsibilities and how this impacts their business development.
Statement of the Problem
Many traders in Gombe State lack a clear understanding of the role taxation plays in business growth. While taxes are crucial for public revenue generation, small businesses often perceive them as an additional financial burden that impedes their profitability and expansion. Moreover, inadequate tax education and weak enforcement mechanisms have led to tax evasion, undermining the potential benefits businesses could derive from formal compliance, such as access to loans, grants, and government contracts. This study aims to investigate how taxation affects the growth of small businesses, particularly traders, in Gombe State, and to identify the challenges they face in complying with tax laws.
Objectives of the Study
1. To examine the role of taxation in the growth of small businesses in Gombe State.
2. To identify the challenges faced by traders in Gombe State in complying with tax obligations.
3. To propose strategies for improving tax compliance among small businesses in Gombe State to promote their growth.
Research Questions
1. What role does taxation play in the growth of small businesses in Gombe State?
2. What challenges do traders in Gombe State face in meeting their tax obligations?
3. How can small businesses in Gombe State improve their tax compliance to foster growth?
Research Hypotheses
1. Taxation has a significant positive impact on the growth of small businesses in Gombe State.
2. Traders in Gombe State face significant challenges in complying with tax regulations.
3. Improved tax compliance will result in greater growth for small businesses in Gombe State.
Scope and Limitations of the Study
This study will focus on traders in Gombe State and will explore how taxation affects their growth and development. A limitation of the study is that it may not account for the broader regulatory and economic factors that influence business growth, such as access to finance or market conditions.
Definitions of Terms
• Taxation: The process of imposing financial charges on individuals or entities by a government for the purpose of funding public services and infrastructure.
• Small Business Growth: The process of expanding a small business in terms of revenue, market share, or employee size, often driven by increased demand and the successful scaling of operations.
• Traders: Individuals or entities engaged in the buying and selling of goods or services, often on a small scale.
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