AN INVESTIGATION INTO PERSONAL INCOME TAX REGULATIONS IN CAMEROON

CHAPTER ONE

INTRODUCTION

Background of the Study

The economies of most countries in the world, whether developed or developing, rely on some type of taxes. Taxation is a very efficient means for governments to generate income and bolster the economy. According to Eniola & Entebang (2015), the utilisation of tax money is crucial for supporting developmental activities in economies that are less developed. Various nations throughout the globe have distinct fiscal policies that allow them to implement various sorts of taxes on their inhabitants in order to generate income and strengthen their economy (Gupta & Sawyer, 2015). Hence, the Nigerian government, like other nations, exercises its legal authority to enforce various types of taxation on its inhabitants at its discretion. Similarly, the government of Gombe State has legal authority that enables it to enforce taxes on its citizens at any desired rate, with the aim of enhancing income collection (Ngong, 2015). As previously said, the major objective of taxes is primarily to create income for funding government expenses, providing social amenities, and promoting the welfare of the population. Taxation is used as a tool of economic control to either discourage or encourage certain types of socioeconomic behaviour. Furthermore, it might be used to accomplish precise economic goals of governments. Additionally, it serves as a tool to enhance the gross domestic product, stimulate economic growth, and impact a positive balance of payments with other nations (Carnahan, 2015). Personal income tax is a crucial element of fiscal policy in several nations, acting as a substantial source of revenue for governments globally. Personal income tax in Cameroon plays a vital role in funding governmental spending, providing support for social welfare programmes, and stimulating economic growth. Nevertheless, the efficacy and proficiency of personal income tax legislation in Cameroon could encounter diverse problems and inefficiencies. Cameroon's tax system has had substantial revisions in recent years, with the goal of modernising tax administration, improving compliance, and conforming to international norms (Devarajappa, 2017). The tax policies of the country are shaped by internal economic circumstances, worldwide taxation patterns, and obligations to international institutions such as the International Monetary Fund (IMF) and the World Bank. However, there are still some unresolved problems within Cameroon's personal income tax system, despite the attempts made to address them. The intricate nature and lack of clarity in tax legislation might impede adherence and undermine the confidence of taxpayers (Kalpana, 2016). Furthermore, there are ongoing questions about the equality and fairness of the tax system, since some groups of the population are burdened with an unequal share of taxes. The presence of administrative problems, such as tax evasion, insufficient enforcement tools, and bureaucratic bottlenecks, presents substantial barriers to the successful collection and enforcement of taxes. These issues not only hinder the collection of money but also weaken the government's ability to finance crucial public services and infrastructure. Moreover, the examination of the influence of personal income tax rules on economic growth and development is a topic that is receiving more and more attention (Gooch and Williams, 2015). Excessive tax rates, inadequately structured incentives, and inconsistent enforcement methods may discourage investment, entrepreneurship, and innovation, impeding economic advancement. Cameroon's personal income tax legislation must adhere to international norms in order to remain competitive and attract foreign investment within the framework of globalisation. Not doing so may lead to the outflow of money, decreased investor trust, and limited opportunities for economic growth. Considering the significance of personal income tax in maintaining Cameroon's fiscal stability and promoting economic growth, it is crucial to do thorough study to tackle the identified difficulties (Forstater, 2018). Policymakers may develop more effective tactics to increase revenue, promote justice, and support sustainable economic development by comprehending the complexities, consequences, and possible revisions of personal income tax legislation. Therefore, the researcher sought to investigate  personal income tax regulations in Cameroon.

Statement of the Problem

Cameroon, like to several countries, significantly depends on personal income tax as a substantial revenue stream for its government. Nevertheless, the efficacy, fairness, and productivity of personal income tax legislation in Cameroon may encounter diverse problems and inefficiencies. Although these rules are crucial for the country's fiscal policy, there is still a lack of complete knowledge of their complexities, execution, and effects on people and the whole economy (Forstater, 2018). The personal income tax legislation in Cameroon may be too complex, resulting in taxpayer confusion and impeding compliance. The tax assessment process may suffer from a lack of openness, which may hinder taxpayers' complete understanding of their duties. There are potential questions about the equality and fairness of the existing personal income tax system. Certain demographic groups, such as those with low incomes or those in specialised occupations, may experience a disproportionate burden or advantage from loopholes in the system, resulting in unfair results (Eniola & Entebang, 2015). The presence of administrative inefficiencies within the tax collecting and enforcement organisations has the potential to diminish the efficacy of personal income tax legislation. Challenges such as tax evasion, insufficient enforcement methods, and bureaucratic obstacles might hinder the effective execution of tax laws. The current personal income tax system may have unforeseen effects on economic growth and development. Excessive tax rates or inadequately structured tax incentives may deter investment, entrepreneurship, and productivity, hence hindering overall economic advancement (Eniola & Entebang, 2015). Cameroon's personal income tax policies need to conform to international norms in order to remain competitive and attract foreign investment. Noncompliance with these norms may lead to the outflow of money, diminished investor trust, and impeded economic progress. It is of utmost importance to tackle these issues in order to improve the efficacy, fairness, and efficiency of personal income tax laws in Cameroon. This will eventually lead to sustained economic growth and development. Hence, the study investigate  personal income tax regulations in Cameroon.

1.3 Objectives of the Study

The broad objective of the study is to  investigate  personal income tax regulations in Cameroon. The specific objectives is as follows

Analyze the compliance behavior of individual taxpayers with regards to personal income tax in Cameroon.

Assess the implications of personal income tax regulations in Cameroon.

Investigate the challenges faced by tax administration authorities in enforcing personal income tax in Cameroon.

Explore taxpayers' perceptions regarding personal income tax regulations in Cameroon.

1.4 Research Questions

The following questions have been prepared for the following

What is the compliance behavior of individual taxpayers with regards to personal income tax in Cameroon?

What is the implications of personal income tax regulations in Cameroon?

What are the challenges faced by tax administration authorities in enforcing personal income tax in Cameroon?

What are taxpayers' perceptions regarding personal income tax regulations in Cameroon?

1.5 Significance of the Study

The study will inform policy reform initiatives aimed at enhancing the effectiveness, equity, and efficiency of tax regulations. Policymakers can use the research findings to implement targeted reforms that streamline tax administration, improve compliance mechanisms, and promote fairness in the tax system.

This study will help the ministry of taxation to better design and implement more efficient tax systems for the administration of taxes in future.

This research will also add to the literature in this area of study hence the research will be useful to other researchers especially accountants studying any relationship between personal income.

1.6 Scope of the Study

The study focuses on  personal income tax regulations in Cameroon. Empirically, the study will analyze the compliance behavior of individual taxpayers with regards to personal income tax in Cameroon, assess the implications of personal income tax regulations in Cameroon, investigate the challenges faced by tax administration authorities in enforcing personal income tax in Cameroon and explore taxpayers' perceptions regarding personal income tax regulations in 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.

1.8Definition of terms

Personal Income Tax: Personal income tax refers to a direct tax levied on the income earned by individuals, including wages, salaries, bonuses, dividends, interest, and other forms of income. It is typically imposed by governments at various levels (national, state, or local) and is calculated based on the individual's taxable income, with specific deductions, exemptions, and tax rates applied according to applicable laws and regulations.

Tax Regulations: Tax regulations encompass the rules, guidelines, and provisions established by governmental authorities to govern the assessment, collection, and administration of taxes, including personal income tax. These regulations outline the rights and responsibilities of taxpayers, specify taxable events and income sources, define allowable deductions and exemptions, and prescribe procedures for tax compliance, reporting, and enforcement.

Equity: Equity in taxation refers to the principle of fairness and impartiality in distributing the tax burden among taxpayers based on their ability to pay. It entails ensuring that individuals with similar financial capacities contribute proportionately to the public revenue, thereby promoting social justice and mitigating income inequality.

Tax Compliance: Tax compliance denotes the extent to which taxpayers adhere to tax laws and fulfill their obligations to report income, calculate taxes owed, and timely remit tax payments to the government. Compliance involves accurately completing tax returns, maintaining proper records, and cooperating with tax authorities to facilitate audits and investigations as necessary.

Tax Evasion: Tax evasion involves the illegal or fraudulent evasion of tax obligations by deliberately underreporting income, overstating deductions, concealing assets, or engaging in other deceptive practices to reduce tax liability. It constitutes a violation of tax laws and regulations and may result in civil penalties, fines, or criminal prosecution.