Effects of Taxation on Financial Performance of Small and Medium Enterprises in the Democratic Republic of Congo, Bunia City
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Date
2020-08
Authors
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Publisher
Daystar University, School of Business and Economics.
Abstract
Small and medium enterprises (SMEs) play a significant role in income generation, job creation, poverty reduction and reduction of income inequality. This study assessed the effects of taxation on the financial performance of selected SMEs in the Republic Democratic of Congo (DRC), and particularly in Bunia City. It specifically aimed to establish the types of taxes levied on SMEs in Bunia City, determine the effects of taxes on the financial performance of selected SMEs in Bunia City, determine the taxation challenges faced by SMEs in Bunia City, and determine measures that can be used to curb the taxation challenges. The study used mixed research design and targeted formal SMEs in Bunia City estimated to be 41 in total. Simple random sampling technique was used to select a sample size of 82 respondents comprising SMEs’ owners and finance managers. Questionnaires were used in data collection, and descriptive statistics were used in data analysis with the help of the Statistical Package for the Social Sciences (SPSS) version 20.0. The study found that VAT (34%), income tax (31%), presumptive tax (15%), and customs duty tax (20%) were the types of taxes levied on SMEs in Bunia City. It was further established that the complicated nature of taxation (53.6%), high taxation, unique qualities of SMEs (64.3%), taxation policies (50.0%), and high taxation penalties (57.1%) affected the performance of SMEs in Bunia City. Also, the SMEs in Bunia City faced challenges such as poor taxation procedures (55.4%), application of similar cost for the tax rate for both small and large enterprises (48.2%), multiple taxes (46.4%), difficult importation and exportation procedures (48.2%), and inadequate taxation education (76/8%). It was concluded that taxation measures and challenges affected the financial performance of SMEs in Bunia City. The study recommends the need for taxation authorities to subject SMEs to taxes that resonate with their (SMEs) ability to pay promptly.
Description
Master of Business Administration
in Finance
Keywords
Taxation, Financial Performance, Small and Medium Enterprises, Democratic Republic of Congo, Bunia City
Citation
Bachuza, A. K. (2020). Effects of Taxation on Financial Performance of Small and Medium Enterprises in the Democratic Republic of Congo, Bunia City. Daystar University, School of Business and Economics: Nairobi