Abstract

Small and Medium-Sized Enterprises (SMEs) play a pivotal role in the economic development of Cameroon, contributing to employment generation, innovation, and the overall economic landscape. Despite their importance, SMEs in Cameroon, particularly in urban centers like Buea, face significant challenges that hamper their growth and sustainability. One of the most critical issues confronting these businesses is the burden of multiple taxations. The complexity of the tax system, coupled with overlapping tax obligations from different levels of government, creates a heavy financial strain on SMEs. This study investigates the effect of multiple taxations on the growth of SMEs in Buea, Cameroon.

The research employs a mixed-methods approach, incorporating both quantitative and qualitative data. A sample of 150 SMEs across various sectors in Buea was surveyed to gather quantitative data on the impact of multiple taxations on their growth. Additionally, in-depth interviews with business owners, tax officials, and financial experts provided qualitative insights into the challenges SMEs face and the broader implications of the tax system on their operations.

The findings of the study reveal that multiple taxations have a negative impact on the growth of SMEs in Buea. SMEs are subjected to a wide array of taxes, including income taxes, value-added taxes (VAT), municipal taxes, and various sector-specific levies. These taxes, often imposed by both local and national authorities, create a cumulative tax burden that significantly reduces the profitability of SMEs. The high tax obligations force many businesses to divert funds that could otherwise be used for expansion, innovation, or improving operational efficiency, thereby stifling their growth potential.

Moreover, the research highlights that the administrative complexity associated with tax compliance is another significant barrier to SME growth. The requirement to navigate multiple tax authorities, file numerous returns, and meet diverse compliance obligations places a heavy administrative burden on SMEs, particularly those with limited resources and financial expertise. The cost of compliance, including the need to hire accountants or tax consultants, further exacerbates the financial strain on these businesses.

The study also identifies a lack of clarity and transparency in the tax system as a major issue. Many SME owners in Buea report difficulties in understanding their tax obligations, leading to inadvertent non-compliance and subsequent penalties. The overlapping tax jurisdictions and inconsistent enforcement practices contribute to an unpredictable business environment, making it difficult for SMEs to plan and manage their finances effectively.

Furthermore, the research explores the behavioral responses of SMEs to the burden of multiple taxations. Many businesses resort to informal practices, such as underreporting income or avoiding registration, as a means of evading taxes. While these practices may provide short-term relief, they also limit the ability of SMEs to grow and scale their operations, as they remain outside the formal financial system and miss out on opportunities for government support or financing.

Despite these challenges, the study notes that some SMEs have adopted coping strategies to mitigate the impact of multiple taxations. These strategies include engaging in tax planning, seeking professional tax advice, or lobbying for tax reforms through business associations. However, these approaches are not accessible to all SMEs, particularly smaller or less established businesses, which remain disproportionately affected by the tax burden.

The study concludes that multiple taxations significantly hinder the growth of SMEs in Buea by reducing profitability, increasing administrative burdens, and fostering an environment of uncertainty and informality. To address these issues, the research recommends that the Cameroonian government streamline the tax system to reduce the overlap of tax obligations and simplify compliance procedures for SMEs. Additionally, there should be greater transparency and education efforts to ensure that SME owners understand their tax obligations and can comply without undue burden. Finally, policy reforms should focus on creating a more enabling environment for SMEs, where taxation supports rather than stifles business growth.

Keywords: Multiple taxations, SMEs, growth, tax burden, compliance, Buea, Cameroon, informal sector, tax reform, business environment