AN INVESTIGATION INTO FACTORS LIMITING THE ACCESS TO TAX INCENTIVES AMONG BUSINESSES  IN  YAOUNDÉ, CAMEROON

CHAPTER ONE

INTRODUCTION

Background of the study

Tax benefits may be readily identified as the provisions pertaining to specific measures that enable the exclusion, credit, preferential tax rates, or postponement of tax due. Tax incentives include a variety of measures, such as temporary tax vacations, immediate deductibility for certain expenses, or lowered import tariffs and customs taxes. On a different level, it might be difficult to differentiate between rules that are considered part of the overall tax system and those that provide specific treatment. 

This differentiation will become more significance when governments face constraints in their capacity to implement specific tax incentives. As an example, a nation may provide a corporation tax rate of 10 percent specifically for revenue generated from manufacturing activities. The low tax rate may be seen as either an appealing aspect of the overall tax structure that applies to all taxpayers, both domestic and international, or as a specific tax incentive limited to the manufacturing sector within the broader tax system.Tax incentives have been extensively used in developing nations to stimulate economic development, but their cost-effectiveness has long been questioned by fiscal experts. Furthermore, tax incentives may lead to distortions in the allocation of resources, complicate the administration of taxes, and provide opportunities for corruption and rent-seeking (Deloitte, 2016).  The issue arises as to why governments opt to use such an apparently ineffectual and wasteful tool instead of regular budgetary allocations to promote a certain activity. One obvious response in the practical context of policy-making is that tax breaks do not necessitate the need for more money to fund an activity, unlike budget spending (Hawksford, 2016). Developing nations often have limited tax income, which necessitates their governments to carefully manage their budget while funding infrastructure and other necessity in the State. Governments chooses tax expenditure instead of implementing a new spending item, which is be presented as a 'tax reduction' for added convenience. The enduring appeal of tax incentives is attributed to their potential to attract foreign investment, which can provide money and advanced technology to the receiving country (Zolt, 2015). The complexity and intricacy of tax legislation and regulations is a challenge for businesses in comprehending the qualifying requirements and application processes for tax incentives. Similarly, elaborate rules discourage firms from seeking incentives because of the perceived administrative cost and dangers associated with compliance. Numerous businesses lack awareness about the presence of particular tax advantages or possess inadequate understanding about the precise incentives accessible to them. Also, the absence of knowledge arise from ineffective communication channels, poor outreach endeavours by government agencies, or a general lack of comprehension of the advantages of tax incentives as  obtaining tax incentives often requires a certain degree of financial literacy in order to effectively navigate the application procedure, evaluate eligibility conditions, and comprehend the possible financial advantages. In addition, companies without financial acumen have difficulties in recognizing relevant tax incentives or may be reluctant to allocate resources towards pursuing them. Businesses, particularly smaller organizations with little administrative capability, have considerable obstacles in meeting the administrative requirements necessary to receive tax benefits. These requirements include lengthy paperwork, reporting duties, and compliance monitoring. The apparent intricacy and labor-intensive nature of these regulations dissuade enterprises from seeking incentives. Lastly, businesses have obstacles in allocating time and resources to investigate and pursue tax benefits due to limited cash resources, workforce limitations, and conflicting operational goals. Smaller enterprises, specifically, have insufficient capability to efficiently traverse the intricacies of incentive programmes. Therefore, the researcher sought to investigate factors limiting the access to tax incentives among businesses  in  Yaoundé, Cameroon. 

1.2 Statement of the problem

Although there are many tax incentive programmes designed to encourage investment and entrepreneurship, several businesses encounter difficulties that hinder their capacity to fully capitalize on these benefits. Multiple studies have emphasized the significance of tax incentives in stimulating company growth, generating employment opportunities, and fostering general economic well-being (Bartik, 2020). Nevertheless, the efficacy of these incentives is contingent upon enterprises' ability to traverse complex regulatory frameworks and administrative processes. Business firms wishing to take advantage of tax benefits face uncertainty due to unclear qualifying requirements, complicated application procedures, and uneven enforcement of tax regulations. Moreover, there is a significant disparity in the knowledge and comprehension of the existing tax advantages among enterprises. The lack of comprehensive information on the various incentives, their eligibility criteria, and possible advantages further complicates the difficulties encountered by firms in properly using these possibilities (Cai & Liu, 2019; Sierra-García & Martínez-Merino, 2020). The above forms the problem the study  trys to tackle hence, the need to investigate factors limiting the access to tax incentives among businesses  in  Yaoundé, Cameroon.  

1.3 Objective of the study

The broad objective of the study is to investigate factors limiting the access to tax incentives among businesses  in  Yaoundé, Cameroon.  The specific objectives is as follows:

Assess the level of tax incentives given to businesses in Yaoundé, Cameroon.

Identify the factors contributing to limited access to tax incentives among businesses in Yaoundé, Cameroon.

Examine the effect of tax incentives on businesses in Yaoundé, Cameroon

proffer  recommendation  aimed to enhance the accessibility of tax incentives for businesses in Yaoundé, Cameroon.

1.4 Research questions

The following questions have been prepared for the following

What is the level of tax incentives given to businesses in Yaoundé, Cameroon?

What are the factors contributing to limited access to tax incentives among businesses in Yaoundé, Cameroon?

What is the effect of tax incentives on businesses in Yaoundé, Cameroon?

What are the recommendation  aimed to enhance the accessibility of tax incentives for businesses in Yaoundé, Cameroon?

1. 5   Significance of the Study

The findings of the study will be significant to the following

Business organizations: the findings of the study will be significant to businesses as tax incentives will help the small scale industries to spring up and aid in the expansion of existing ones thereby improving the standard of living of the populace and its surrounding environs. It will also lead to the creation of more businesses and with the expansion of the existing ones, the standard of living of the populace will be positively affected

Academia: The study adds to the existing body of academic literature on taxation. It provides researchers, scholars, and practitioners with empirical insights into the challenges and opportunities associated with tax incentivesand serve as a reference for future research purposes.

1.6   Scope  of the Study

The study focuses on factors limiting the access to tax incentives among businesses  in  Yaoundé, Cameroon. Empirically, the study will assess the level of tax incentives given to businesses in Yaoundé, Cameroon, identify the factors contributing to limited access to tax incentives among businesses in Yaoundé, Cameroon, examine the effect of tax incentives on businesses in Yaoundé, Cameroon and proffer  recommendation  aimed to enhance the accessibility of tax incentives for businesses in Yaoundé, Cameroon.

1.7    Limitations of the Study

Like in every human endeavour, the researchers encountered slight constraints while carrying out the study. Insufficient funds tend to impede the efficiency of the researcher in sourcing for the relevant materials, literature, or information and in the process of data collection (internet, questionnaire, and interview), which is why the researcher resorted to a moderate choice of sample size. More so, the researcher will simultaneously engage in this study with other academic work. As a result, the amount of time spent on research will be reduced.

1.8Definitions of Terms

Tax Incentives: Tax incentives refer to special provisions in the tax code that are designed to encourage certain behaviors or activities by reducing the tax burden on individuals or businesses. These incentives may take the form of tax deductions, credits, exemptions, or preferential tax rates, and are typically aimed at promoting investment, economic development, job creation, or other specific policy objectives.

Access: In the context of this study, "access" refers to the ability of businesses in Yaoundé, Cameroon, to effectively utilize and benefit from available tax incentives. It encompasses factors such as awareness of incentives, understanding eligibility criteria, navigating administrative processes, and overcoming any barriers or challenges that may hinder businesses from leveraging tax incentives to their full potential.

Factors Limiting Access: "Factors limiting access" denotes the various obstacles, challenges, or constraints that impede businesses in Yaoundé from fully accessing and utilizing tax incentives. These factors may include regulatory barriers, administrative complexities, lack of awareness or information, bureaucratic hurdles, legal constraints, and other systemic or institutional challenges that hinder businesses' ability to leverage tax incentives effectively.

Businesses: In the context of this study, "businesses" refer to entities engaged in commercial activities, including but not limited to corporations, partnerships, sole proprietorships, and small and medium-sized enterprises (SMEs), operating within the geographical area of Yaoundé, Cameroon. This encompasses a diverse range of industries, sectors, and business sizes, each potentially affected by the accessibility and utilization of tax incentives.