AN ASSESSMENT INTO THE IMPACT OF TAXATION ON THE ECONOMIC DEVELOPMENT OF CAMEROON. A CASE STUDY OF DJOUM MUNICIPAL, CAMEROON

CHAPTER ONE

INTRODUCTION

Background of the study

Economic growth refers to the continuous and prolonged rise in a country's gross domestic product (GDP), resulting in an increase in per capita income (Bird & Zolt, 2018). In order for this to be feasible, the GDP growth rate must surpass the population growth rate. Economic growth refers to a consistent and prolonged rise in the per capita national production or net national product. Economic development is the expansion of a nation's production potential frontier, resulting in an outward shift (Gbeke & Nkak, 2021). The economic progress of a country is contingent upon the generation and management of resources to pay its infrastructure and daily expenses. The required resources are considered to be created by a structured tax system, both externally and internally. Taxation, as a macroeconomic policy instrument, has a crucial role in influencing the magnitude and rate of economic expansion across countries (Adeusi, Uniamikogbo, Erah & Aggreh, 2020). Taxation is a mechanism used by the government to generate revenue for public use. A tax is a mandatory payment levied by the government on the income, profit, or wealth of people, groups, and corporations. An well crafted tax system may assist developing nations' governments in allocating their expenditure, establishing resilient institutions, and enhancing democratic accountability (Agunbiade & Idebi, 2020). The primary objective of a tax is to facilitate the funding of the public sector's operations in order to attain a nation's economic and social objectives. It may also serve the objective of redistributing money to achieve social fairness. Hence, taxes may serve as a tool for attaining both micro and macroeconomic goals, particularly in emerging nations like Nigeria. Asaolu, Olabisi, Akinbode, and Alebiosu (2018) argue that the declining level of tax income collection in developing nations has challenges in using tax as a tool for fiscal policy to promote economic growth. However, Abomaye (2017) comments on this issue. Several governments, like Canada, the United States, the Netherlands, and the United Kingdom, have significantly shaped their economic growth by relying on tax money derived by corporate income tax, value added tax, and personal income tax. These countries have thrived as a result of their tax revenue. In Africa, a substantial amount of tax revenue is derived from natural resources, including money from production sharing, royalties, and corporate income tax imposed on oil and mining corporations (Adegbie, Olajumoke, & Kwarbai, 2016). Tax sources are fundamental and highly dependable means of generating government income due to their inherent predictability and flexibility. The attribute of certainty suggests that the collection of taxes from taxpayers is certain, assuming all other factors remain constant. The status of the economy does not have an impact on tax collection, regardless of whether it is experiencing a decline, stagnation, or growth. The government's ability to adapt the tax system to align with its intended objectives is facilitated by its flexibility. Taxation is seen as an obligation that every person must shoulder in order to support their government, since the government has certain responsibilities to fulfil for the welfare of its constituents (Ayeni, Ibrahim, & Adeyemi, 2017). Against the background,  the researcher sought to assess the impact of taxation on the economic development of Cameroon. A case study of Djoum municipal, Cameroon.

Statement of the problem

Governments throughout the globe have long relied on taxation as a primary means of funding their operations. The government uses the money it collects in taxes to do the things it has always done: provide public amenities, keep the peace, protect the country from outside threats, and regulate businesses and commerce to keep society and the economy running smoothly(Tait, 2017). But it's clear that taxes isn't doing its job of boosting Nigeria's economy, mostly due to incompetent management. Tax administration in Nigeria faces numerous challenges. These include a lack of professionalism, accountability issues, public ignorance about the importance and advantages of taxes, corrupt tax officials, tax evasion and avoidance by taxing units, collusion between taxing officials and the taxing population, a high tax rate, and ineffective methods of collecting taxes (Igbasan, 2015). The ever-increasing obstacles and difficulties are outstripping the resources available to tax administration and particular agencies, including staff, money, equipment, and machinery. Actually, the issue of accurate tax data, low motivation, and inadequate compensation are the root causes of most tax collectors' unfriendly attitude towards taxpayers. Taxation is a pivotal factor in influencing the economic structure of countries around the globe. Within the framework of Cameroon, a growing nation that is actively pursuing sustainable economic expansion, it is crucial to comprehend the ramifications of taxes on the progress of the economy (Atems , 2015). Nevertheless, despite its importance, there is a lack of extensive empirical study that specifically examines the influence of taxes on economic growth, especially at the local level. Hence, the study assess the impact of taxation on the economic development of Cameroon. A case study of Djoum municipal, Cameroon.

1.3 Objective of the study

The broad objective of the study is to assess the impact of taxation on the economic development of Cameroon. A case study of Djoum municipal, Cameroon. The specific objectives is as follows

Examine the types of taxes adminstered in Cameroon.

Assess the impact of taxation on the economic development of Cameroon

Investigate the relationship between tax revenue and economic development initiatives in Cameroon.

1.4 Research questions

The following questions have been prepared for the following

What are the types of taxes adminstered in Cameroon?

What is the impact of taxation on the economic development of Cameroon?

Is there a relationship between tax revenue and economic development initiatives in Cameroon?

1.5 Resrearch Hypotheses

The hypotheses have been formulated to further guide the study

H0: There is no relationship between tax revenue and economic development initiatives in Cameroon.

Ha: There is a relationship between tax revenue and economic development initiatives in Cameroon.

1.6 Significance of the study

The findings of the study will be significant to the following

Policymakers: By gaining a better understanding of the relationship between taxes and economic development in Cameroon, policymakers will be better equipped to design and execute tax policies that achieve their dual goals of generating revenue and fostering long-term economic growth and development.

Academic Contribution: The study contributes to the existing body of knowledge on taxation and economic development by providing empirical evidence and insights specific to the Cameroonian context. This can serve as a reference point for future research and academic discourse on similar topics.

1.7 Scope of the study

The study focuses on the impact of taxation on the economic development of Cameroon. A case study of Djoum municipal, Cameroon. Empirically, the study will examine the types of taxes adminstered in Cameroon, assess the impact of taxation on the economic development of Cameroon and investigate the relationship between tax revenue and economic development initiatives in Cameroon.

1.8 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.

1.9 Definition of terms

Taxation: The process by which governments collect revenue from individuals and entities within their jurisdiction, typically through levying taxes on income, consumption, property, or transactions.

Economic Development: The sustained, concerted actions of policymakers and communities aimed at improving the economic well-being and quality of life for a society, including factors such as increased productivity, income growth, employment opportunities, and overall prosperity.