Impact Of Multiple Taxation On Small And Medium Scale Businesses In Uyo Urban

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Nigeria happens to be one of those countries that desire to build a civilized nation with a strong and sound economy. Demonstration of such a desire is seen in Tax payment, but most citizens see it as government’s means of exploitation. Tax is a contribution imposed by the Government on income earners, importers, companies, investors, exporters, etc. (Holban, 2007).

Revenue generated from tax happens to be a major source ofGovernment revenue in Nigeria, which makes it an important tool in the development of her economy. Every nation’s tax policy and equally their systems are related, greatly, with businesses and ventures in that country. A successful and finance-healthy business environmentis the result of aneconomy that enacts favorable tax policies. As businesses do well, the economy flourishes as well. This is because there is no faster way of quickening things in an economy other than the help of organizations that move goods, money services, and investments from those with surplus to those with deficit; those with marketable ideas/output to those who need these ideas and products. This shows that, businesses and tax policies are inter dependent. Each can’t do without the other.

Tax System in Nigerian in recent times, has undergone notable changes. Various studies and researches by tax experts have helped as Tax laws are being reviewed with the aim of replacing non relevant provisions while simplifying the main ones. The current Nigerian lawplaced the responsibility on the shoulders of the 3 tiers of Government to enforce taxation with each having its jurisdiction clearly spelt out in the Taxes and Levies (approved list for Collection).

Small businesses as generally recognized as drivers of economic success are a key ingredient in the “ecology of businesses” in a healthy system. They create jobs; generate sales which are sources of tax and fiscal revenue for government. The importance of small business as a creator of jobs cannot be ignored, especially for those with low skills. Small, medium and micro-enterprises (“SMMEs”) as they are generally categorizedemploy 68.2% of the workforce in the private sector while contributing to 60% of the country’s GDP. SMBs employ more than 60% of the total workforce in sectors like the agriculture,retail, construction etc. This has over the years, seen to the growth in employment by SMBs and has quadrupled their contribution to the nation’s GDP. Indeedthis sector of the economy, hold a hugepotential for job creation!


One of the constraints to the expansion of businesses both in Nigeria and beyond are regulations otherwise known as red tapes in tax. As reported by International research, tax regulatory compliance costs are a significant portion of the total regulatory cost. There are several other patterns that haveemerged from the various local and international studies carried out, among the most imperative being that tax compliance costs comprises a much larger proportion of total compliance costs for smaller ventures.


Furthermore, various studieshave suggested that for any approach to assist small business to be effective it will require both policy and administration model adjustments. The year 2005 saw the start of a process of structural change, intended to build a positive tax compliance climate for income earners and businesses in Nigeria.




Small and Medium Businesses (SMBs) form the core of majority of the world’s economies.Federal Office of Statistics carried out a study that shows thatsmall and medium enterprises make up 98% of the economy in Nigeria; however, the mortality rate of these small businesses has been on the increase (Arroyo, 2005). According to Small and Medium Enterprises Development Agency of NigeriaSMEDANan SMB body in Nigeria, 70% of businesses into manufacturing, retailing and Agro based in Nigeria die off before their 5th anniversary.Tax related issues like multiple taxations and enormous tax burdens such as double tax assessment on the profit of the business and income of the owner are among the factors responsible for these untimely business close-ups. Reason has been that small and medium enterprises are usually viewed and treated in the same light as large corporations in many government policies. This is a major setback, the ignoring of their different unique natures. It is paramount to considerthese unique qualities, while dealing with small and medium enterprises. There is a needto consider issues on how these tax policies can be designed to encourage the growth of Small scale businesses with the most effective ways to administer them.

Many businesses are not favored by the existing tax policies thereby making Tax a burden and a major problem for Start-Ups in Nigeria. Like we saw earlier, some businesses are already at the verge of collapse, while to ensure their businesses still exist, majority are still struggling to meet up with high tax rates Bateman (2007). A recent survey has shown that 91% of business owners admit that taxes have been huge constraints on their businesses, as it does not allow new businesses to cover up initial cost because taxes are high.

An explanatory example of a medium scale business that has wind up in recent time precisely year 2014 in Uyo urban was Agatha Garden and Hotel Ltd (Source)  Letter of Cessation of business  written to Debt Management and Enforcement office(DM&EO) of the Federal Inland Revenue Service(FIRS) dated 23rd October,2014 Referenced FIRS/SS/RHQ/DMO/113

The content of the letter accompanied by other relevant reports not made available to me as requested for the purpose of this research work state that management of the Hotel decided to cease business activities because the cost of running the business was more than the revenue generated coupled with the series of uncollectable Tax Audit liabilities raised from 2007 to 2013 when the company was handling some major contract work with Mobile unlimited.

According to the Federal Inland Revenue service (FIRS)Audit report

Theincome generated by the Hotel was taxable and must be paid based on the audit findings

However, failure will attract legal action against the Hotel management which was already been instituted by the Legal Department of the Service through Debt Management and Enforcement office



The main objective of the study is to examine the impact of taxation on small and medium scale businesses in Uyo urban. Specific objectives of the study are:

  1. To examine the relationship between multiple taxation and SMBs survival in Uyo Urban.
  2. ToIdentify the multiple taxes which the owners and operators of SMBs have been paying in Uyo Urban.
  3. To trace the failure or close up of Small and medium Scale Businesses in Uyo Urban to Multiple taxation.
  4. To find out the after effect of the business failures or close ups on the owners, operators, employees and the state in general.
  5. To recommend better ways of reducing the incidence of multiple taxation on SMBs in Uyo Urban.



In-order to guide the study and achieve the above stated research objectives, the following questions were formulated:

  1. What relationship exists between multiple taxation and survival of small and medium scale businesses in Uyo urban?
  2. What are the various forms of multiple taxes which the owners and operators of SMBs have been paying in Uyo Urban?
  3. How can the failure or close up of Small and medium Scale Businesses in Uyo Urban be traced to Multiple taxation?
  4. What are the after effect of the business failures or close ups on the owners, operators, employees and the state in general?
  5. What better ways can be implemented to reduce the effect of multiple taxation on SMBs in Uyo Urban?



  1. Ho: There is no significant relationship between multiple taxation and SMBs’ survival.

Hi: There is a relationship between multiple taxation and SMBs survival


  1. Ho: Multiple taxation do not account for business failures or close ups in Uyo Urban.

Hi:Multiple taxation accounts for business failures or close ups in Uyo Urban



This study when conducted could give a clear insight into the various ways in which tax policies in Nigeria can be executed efficiently to still favor small businesses and how some taxation policies in Nigeria could be properly tackled. The study could also give a clear insight into the various causes of why small businesses fail in Nigeria as well as the challenges of the tax policies in Nigeria. The findings and recommendations of the researcher would help in building a strong and better tax policy system in Nigeria. The effects of multiple taxation on small and medium scale businesses are outlined in-order for drastic measures to be taken to tackle these challenges and meet the prospects of the general public so that revenue from tax policy to the government can be increased.




This research focuses mainly on the impact of taxation on SMBs in Uyo Urban. The study only torches on the various taxes collected from SMBs, challenges tax policies in Nigeria and how it can affect self employed business men and women, traders, and other forms of sole proprietorship businesses.



The only limitation faced by the researcher in the course of carrying out this study was the delay in getting data from the various respondents. Most respondents were reluctant in completing questionnaires administered to them due to their busy schedules and nature of their work. The researcher found it difficult to collect responses from the various respondents, and this almost hampered the success of this study.




Chapter one of this study includes the general introduction, background information about the study, statement of the problem, objectives of the study, research questions, scope of the study, significance of the study, and the limitation of the study.

Chapter two reviews all relevant literatures relating to the study as well as the researcher’s views concerning previous studies on the effect of multiple taxation on Small and Medium Scale Businesses.

Chapter three includes the methodology applied in collecting and analysing data, population definition, study site, and limitations.

Chapter four presents the results of the study as well as data analysed, and the interpretation of the analyzed data.

Chapter five includes a summary of the study, conclusion and recommendations based on the findings from the study.


1.9.1 Historical Background of Uyo Urban and multiple Taxation System

Uyo is a city in south-south Nigeria and is the capital of Akwa Ibom State, a major oil producing state of Nigeria. The city became the capital of Akwa Ibom State on September 23, 1987 following the creation of Akwa Ibom State from erstwhileCross River State. The University of Uyo resides in this city. The population of Uyo, according to the 2006 Nigerian Census which comprises Uyo and Itu, is 436,606.while the urban area, including Uruan, is 554,906.

The city can be accessed by road via the A342 highway, as well as Abak Road, Nwaniba Road, Itu Road, and Aka Road. Nearby airports include the Uyo Airport, also known as the Akwa Ibom International Airport.

Uyo is a fast-growing city, as the city has witnessed massive infrastructural growth in the past nine years. It has an intensive network of divided highways, such as the IBB Way, AtikuAbubakar Avenue, UdoUdoma Avenue, NsikakEduok Avenue, and EdetAkpan Avenue which is an eight-lane superhighway and currently the widest road in the Uyo metropolis.[citation needed] Currently, flyovers are being constructed to ease traffic. Three flyovers have already been completed at the Itam axis of the urban area which is under Itu jurisdiction. Plans are in process for more flyovers as well as ongoing dualisation of Aka road, ongoing construction of Ring Road 3 with flyovers (a portion of it will be ten lanes) and the dualisation of WellingtionBassey Way

Thisunprecedentedinfrastructural development has led to increase in the number of new businesses thereby also translating to increase government internally generated revenue through Taxation.

However, the process of generating revenue by the Akwa Ibom State Internal Revenue Service over time has been challenging reason been that small and medium business owners are complaining and in most case resistant to TaxAuthority because of multiple Taxes.

Notable among the multiple tax imposed in places such as URUA AKPANAMDEM(Akpanamdem Market) include general market tax, Environmental sanitation fees, security fees and kiosk/space fees

Trycircle operators (keke) in February 2015 staged a peaceful demonstration against what they term multiple tax been collected by the state tax force an affiliate of the state ministry of transport and environment.



Tax: According to Ariyo(2005), atax is a financial charge or other levy imposed upon a taxpayer (an individual or legal entity) by a state or the functional equivalent of a state to fund various public expenditures.

SMB: Small and Medium Scale Businesses

Multiple Taxation: When a single amount of money is taxed more than once, often by two or more different authorities in a way that may be unfair or illegal (Bateman, 2007).


Ariyo, D. (2005): Small Firms are the Backbone of the Nigerian Economy. Retrieved October

22nd, 2010, from

Bateman, A. (2007): Globalization of Production and the Competitiveness of Small and

Mediumsized Enterprises in Asia and the Pacific: Trends and Prospects. Publication of United Nations Economic and Social Commission for Asia and the Pacific (ESCAP), Studies in Trade and Investment Series chapter 1, 1-31

  • Holban, O.I. (2007). The Taxation of Small and Medium-Sized Enterprises-a Hindering

Factor Influencing the European Economic Growth.Doctoral dissertation, AlexandruIoanCuza University of Iasi and Academy of Economies Studies from Bucharest Romania.

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