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
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.
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