BACKGROUND TO THE STUDY

Smaller businesses’ capacity to generate employment is unquestionably a big draw for governments in the near term. SMEs must be supported and encouraged to grow. This is crucial for achieving social and economic goals such as eradicating poverty and raising living standards. Economic goals include economic growth and development, a positive trade and payment balance, and employment. Given that SMEs are a vital part of the economy, governments must attend to their requirements. Small and medium-sized businesses (SMEs) are therefore seen as the foundation of economic growth in all nations. In the majority of African countries, smaller firms account for over 90% of all private businesses, more than 50% of all employment, and more than half of all GDP (UNIDO, 2009).

The bulk of manufacturing jobs in Cameroon are reported to be held by small businesses, which have been described as a defining aspect of the country’s production landscape. SMEs are also thought to make up roughly 70% of Cameroon’s enterprises and contribute to the country’s GDP. In accordance with the different claims made above, it is legitimate to state that SMEs, given their economic importance in African nations, have a key role to play in promoting growth, creating employment, and aiding in the reduction of poverty. Despite the potential impact taxes might have on a nation’s GDP, there is still a need to pay close attention to how taxes affect the expansion of small and medium-sized businesses (SMEs).  

However, the literature has not made much progress in examining the detrimental impact of paying taxes on the financial performance of SMEs in developing nations (Baurer, 2005). Due to the necessity to balance the short- and long-term effects of the policy, this circumstance presents severe concerns regarding the issue of matching the tax system to the unique requirements of a particular country’s growth demand.