1Amewuda Abraham | 2David Ackah (PhD)
1St. Johns Grammar School | 2Center for Excellent Training & Consultancy
Email: dashdollar2004@yahoo.com | drackah@ipmp.edu.gh
Abstract
There are many factors that can influence the development of small and medium enterprises in an economy. The most frequently mentioned among them are: state support of the sector, proper legislative support and mechanisms of its fulfilment, access to financial resources and investment incentives. However, one of the most important factors that promotes development and growth of small and medium enterprises is the taxation system. Economists argue that the resources smaller companies direct towards tax compliance are resources that could otherwise be used for reinvestment, facilitating future growth. Hence, there is a belief that taxes and a complex tax system put disproportionate pressure on smaller businesses. Small taxpayers under the regular system of taxation are discriminated against, since the compliance requirements, cost of compliance and tax rate are the same for both small and large enterprises. Reducing the compliance costs and tax rate increases the small enterprises profit margin. It also increases the Government’s tax revenue, since the simplified provisions for a micro enterprise historically reduce the size of the shadow economy and the number of non-complying registered taxpayers.
Keywords: Tax Theory, Public Financial Administration, Economic management, Sustainability of SMEs, Development Economics