LEGAL APPRAISAL OF TAXATION OF SMALL AND MEDIUM BUSINESS ENTERPRISES IN NIGERIA

ABSTRACT
The tax regime of small and medium business enterprises was a snow ball of international agitation specially international monetary fund (IMF). To Nigeria Government to diversify her revenue base from Petroleum tax which consisted of 80% percent of the total revenue. Consequentially, the idea of SMBE tax was introduced in furtherance of tax reforms a committee was constituted in 1991 and January 1993, after the feasibility study of SMBE the report submitted to the Federal government with a recommendation to introduce SMBE Tax. On the other hand, the government viewed Small and Medium Business Enterprises as a very important sector of the economy that has employed many persons. Most big companies started at this level before progressive and attractive. That is why the government has paid special attention to it and as a sector to the Nigerian economy, it is still not progressing as expected and the resultant effect is still far beyond expectations. The objectives of this research are to analyze the effect of tax policy in the growth of SMBE in Nigeria. The methodology employed in this work is the doctrinal method. The problem of this research is despite the tax policies put in place for rapid growth of the sectors in returns for the government to drive huge revenue from it has fail because it is not in commiseration with the government intensions as a result of the following? Over taxation is also a problem of SMBE that is meant to be promoted, encouraged and made very attractive for potential investors in the country and the world as a whole. Also it reveled that tax collectors are not well trained and informed about government policies as regards the protection and encouragement of Small and Medium business Enterprises in Nigeria. Most particularly, they do not consider the size of a particular business in tax assessment. To proffer some solutions, tax assessment and collection should be defined with respect to which government should collect certain taxes from Small and Medium business Enterprises. This will avoid the three tiers of government collecting taxes from the same particular organization. Government should also put a policy in place to avoid illegal taxes, such as community levy, boys or youth levy as well as  association or union levy, also Some of the findings arrived at in this study are absence of a harmonized and gazzetted tax regime, which would enable manufactures to build in recognized and approved levies and taxes payable and also the fact that an effective administration of this sector is lacking there should be an average or tax exemption placed on these young industries to encourage and protect them and to attract  potential investors.

CHAPTER ONE GENERAL INTRODUCTION

       Background To The Study

 
In any given economy, the issue of taxation is of tremendous importance because it serves as revenue generation forum to the government hence; its role cannot be in doubt. Taxation can also be employed as an instrument of economic policy formulation and implementation including a means of wealth redistribution in the economy.
Small and Medium Business Enterprises (SMBE) are newly introduced tax policy for revenue generation income and redistribution. Thus, taxes are a source of revenue to the government. In its first month of operation SMBE in this country yielded revenue of N5.4 billion to the government. Apart from petroleum tax, it is obvious that no other form of taxation either direct or indirect equal the revenue yield of SMBE.¹
Consequently, the idea of SMBE tax was introduced in furtherance of tax reforms. The Federal Government set up in 1991 a study group to review the country‘s indirect tax system.² The study group among other things recommended the administration of SMBE tax in Nigeria and the government accepted the recommendation and therefore, set up a SMBE committee which carried out a feasibility study on SMBE and came up with a report submitted to the Federal Government with a recommendation to introduce SMBE tax in the country in January 1993.³

In addition, a full scale of SMBE tax in Nigeria which extended from the manufacturers through the wholesalers to the retailers and to the ultimate consumers has been impracticable at present. However, a study group in 1991 did recommend for tax on SMBE, and the government accepted that for the immediate future, a modified SMBE tax law should be
introduced, levied and collected from manufacturers or wholesalers and importers levels. Unlike under the sales tax, services should be made subject to the modified SMBE and only a single rate tax of 5% should be levied.
The tax derived from Small and Medium Business Enterprises (SMBE) constitute a heavy revenue which is essential ingredients in the lubrication and development of any economy.In Nigeria, Small and Medium Scale Enterprises dominate the economy.SMBE are sub-sectors of the industrial sector which play crucial roles in industrial development. Following the adoption of the Economic Reform Programme in Nigeria in 1981, there have been several decisions to switch from capital intensive and large scale industrial projects which was based on the philosophy of import development to Small and Medium Business Enterprises which have better prospects for developing domestic economy, thereby generating the required goods and services that will propel the economy of Nigeria towards development.⁴ In designing public policies, particularly tax policies, governments have usually targeted their strategies to large companies. Therefore, there is a need to devise methods to encourage the growth and development of these enterprises so as to ensure that they reach their full potentials. Subsequently, a favourable business and regulatory environment needs to be created for them to thrive. The focus on this study on supporting SMBEs growth through tax policy because most large companies have their roots in small and medium enterprises; they started out as SMBEs before expanding. This means that the future large corporations are the
SMBEs today that should be nurtured to ensure their growth.