Effects of VAT on financial performance of SMEs in developing nation. A Survey of SMEs in Bindura
- Author
- Kumundati, Luke
- Title
- Effects of VAT on financial performance of SMEs in developing nation. A Survey of SMEs in Bindura
- Abstract
-
Taxation was cited by the management and owners of SMEs as the major cause behind the sharp reduction of annual profits and unfavourable working capital between the periods 2018 to 2019. The need for small business enterprises to generate more returns from internal sources has therefore become a matter of extreme urgency linked with taxation of small business enterprise, especially in developing countries. Failure of small business enterprises has grown higher, approximately 80% of businesses close down before their 5th anniversary as a result of tax related issues, incorporating multiple taxation and high tax rates to enormous tax burdens. A mixed method research design was employed. A sample of 15 SMEs from a population of 80 SMEs who complied with tax laws and regulations in Bindura urban was studied. Instruments used in this study included questionnaires and the interview guide. The study found out that taxation reduces corporate profitability, reduces firm working capital, compromises corporate growth and that tax planning does not significantly reduce organizational total costs. Benefits of taxation were that money collected by government is used for infrastructure development and for the provision of grants in order to boost their operations and that local businesses enjoyed competitive advantage against foreign firms due to some selective laws introduced by government iv on foreign firms. In conclusion the study noted that VAT is also an instrument of revenue for the government although it influences businesses negatively or positively depending on the nature of business activities in the country. This study recommended that taxpayers should have more information about taxation (VAT) not only tax awareness.
- Date
- June 2020
- Publisher
- BUSE
- Keywords
- SMEs,
- Taxation,
- Supervisor
- N/A
- Item sets
- Department of Accountancy
Part of Effects of VAT on financial performance of SMEs in developing nation. A Survey of SMEs in Bindura