IMPACT OF TAX COMPLIANCE AND ENFORCEMENT MEASURES ON THE INTERNALLY GENERATED REVENUE IN CAMEROON

CHAPTER ONE

INTRODUCTION

Background of the Study

Governments worldwide provide substantial funds to ensure the provision of essential infrastructure and social services to their citizens, which constitute the core obligations of elected public officials. Governments require substantial amounts of funds to carry out these tasks and fulfil their responsibilities. Taxes are the primary and most dependable means of generating income for the government, surpassing all other sources (Samuel, 2015). A tax is a compulsory charge imposed by the government on an individual's income, profit, or wealth, as well as the income, profit, or wealth of a family, community, corporation, or unincorporated body. Its primary objective is to generate funds for public spending, which is directed towards providing social amenities for the citizens. It is a governmental strategy used to generate revenue for the goal of funding essential services or infrastructure inside the state. Tax is an obligatory payment made by individuals and businesses to the government. It is imposed on workers, their income, corporate earnings, and is also included in the price of some products, services, and transfers. These taxes are placed on personal income sources such as wages, company earnings, interest, dividends, discounts, or royalties in order to produce revenue. It is levied on corporate earnings, petroleum profits, capital gains, and capital transfers (Samuel, 2015). Taxes are compulsory payments or transfers of resources from individuals or businesses to the government. They are made based on certain criteria and are not dependent on any particular benefits obtained. The purpose of taxes is to help accomplish the economic and social objectives of the country. The primary purpose of taxation is to create revenue for the government to finance its expenses (Samuel, 2015). Taxation is a perennial subject that has persisted since ancient times. Taxation is crucial for the socio-economic progress of countries, as it serves as the main source of income for governments to fund public spending and support economic expansion. In Cameroon, as well as in other developing nations, the efficient collection of internally generated revenue (IGR) via taxes is crucial for maintaining public services, creating infrastructure, and reducing poverty. Nevertheless, obstacles pertaining to tax compliance and enforcement continue to impede the country's capacity to optimise revenue collection and accomplish its economic goals. The tax system in Cameroon is distinguished by an intricate assortment of taxes, such as income tax, value-added tax (VAT), business tax, customs duties, and many additional charges. Although the nation has a variety of ways to generate income, there are substantial issues with people not paying their taxes and the government not effectively enforcing tax laws. This results in the country not collecting as much revenue as it could and the possibility of money being lost. The issues are caused by insufficient capacity in tax administration, practices of tax evasion and avoidance, informal economic activity, inefficiencies in administration, and the widespread presence of corruption. The current body of literature on taxes in Cameroon focuses on many significant concerns including tax compliance and enforcement. The studies conducted by Tchakoute Patie et al. (2016) and Abanda et al. (2019) highlight the significance of taxpayer education, streamlining tax processes, and reinforcing enforcement measures in order to improve compliance and increase revenue collection. Furthermore, a study conducted by Fomba Kamga et al. (2018) highlights the significance of tax morale, faith in government institutions, and perceived fairness of the tax system in shaping taxpayer behaviour. However, there is still a need for thorough empirical study to evaluate the effect of tax compliance and enforcement methods on the domestically produced income of Cameroon. An study of this kind may provide policymakers empirically-supported suggestions for enhancing the efficiency of tax laws and administrative procedures. Furthermore, considering the ever-changing nature of the economy and the developing tax environment, it is essential to regularly assess tax compliance patterns and enforcement techniques to guarantee the long-term success of revenue collection endeavours. Hence, this research aims to address this deficiency by undertaking a meticulous analysis of the correlation between tax compliance, enforcement strategies, and domestically produced income in Cameroon. The research seeks to identify the main factors that influence people's compliance with tax regulations by examining data from various sources such as tax records, surveys, and administrative reports. It also aims to evaluate how effective enforcement measures are in ensuring compliance and suggest policy measures to improve revenue generation and fiscal stability. Therefore, the researcher sought to examine the impact of tax compliance and enforcement measures on the internally generated revenue in Cameroon.

1.2 Statement of the Problem

The impact of different tax policies and enforcement tactics on the country's internally generated revenue (IGR) is still uncertain. The main inquiry guiding this research is: How do tax compliance and enforcement methods impact the creation of internal revenue in Cameroon? The objective of this study is to analyse the difficulties and deficiencies in the current tax system, evaluate the effectiveness of enforcement methods, and investigate possible approaches to improve tax compliance in order to maximise revenue collection for long-term economic growth in Cameroon (Samuel, 2015). Hence, the study examine the impact of tax compliance and enforcement measures on the internally generated revenue in Cameroon.

1.3 Objectives of the Study

The broad objective of the study is to examine the impact of tax compliance and enforcement measures on the internally generated revenue in Cameroon. The specific objectives is as follows

Assess the level of tax compliance among various sectors within Cameroon.

Analyze the effectiveness of tax enforcement measures in encouraging compliance among taxpayers in Cameroon.

Investigate the relationship between tax compliance rates and the internally generated revenue (IGR) in Cameroon.

Examine the factors influencing tax compliance behavior among individuals and businesses in Cameroon.

1.4 Research Questions

The following questions have been prepared for the following

What is the level of tax compliance among various sectors within Cameroon?

How effective is tax enforcement measures in encouraging compliance among taxpayers in Cameroon?

Is there a relationship between tax compliance rates and the internally generated revenue (IGR) in Cameroon?

What are the factors influencing tax compliance behavior among individuals and businesses in Cameroon?

1.5 Significance of the Study

The findings of this research can inform the design and implementation of more effective tax policies and enforcement strategies in Cameroon. Understanding how different measures influence tax compliance and revenue generation is crucial for policymakers seeking to optimize revenue collection while minimizing taxpayer burden.

The research adds to the body of knowledge on taxation, compliance behavior, and revenue mobilization in developing countries, particularly in the context of sub-Saharan Africa. It provides empirical evidence and theoretical insights that can enrich academic debates and stimulate further research in related fields.

1.6 Scope of the Study

The study focuses on the impact of tax compliance and enforcement measures on the internally generated revenue in Cameroon. Empirically, the study will assess the level of tax compliance among various sectors within Cameroon, analyze the effectiveness of tax enforcement measures in encouraging compliance among taxpayers in Cameroon, investigate the relationship between tax compliance rates and the internally generated revenue (IGR) in Cameroon and examine the factors influencing tax compliance behavior among individuals and businesses 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

Tax Compliance: Tax compliance refers to the degree to which individuals and businesses adhere to the tax laws and regulations of a particular jurisdiction by accurately reporting their income, calculating and remitting taxes owed, and fulfilling other tax obligations in a timely manner.

Enforcement Measures: Enforcement measures encompass the various strategies and actions employed by tax authorities to ensure compliance with tax laws. This may include audits, investigations, penalties for non-compliance, legal proceedings against tax evaders, and other enforcement mechanisms designed to uphold tax regulations.

Internally Generated Revenue (IGR): Internally Generated Revenue (IGR) denotes the income generated by a government or public entity from domestic sources within its own jurisdiction, excluding external sources such as grants, loans, or aids. In the context of this study, IGR specifically refers to the revenue generated through taxation within Cameroon's borders.

Tax Policies: Tax policies encompass the set of rules, regulations, and principles established by governments to govern the imposition, collection, and administration of taxes. Tax policies dictate the types of taxes levied, tax rates, exemptions, incentives, and other provisions that shape the tax system's structure and operation.

Revenue Mobilization: Revenue mobilization refers to the process of generating income for the government or public sector to finance its expenditures and meet its financial obligations. This includes efforts to increase tax revenue through improved tax collection, enforcement, and compliance measures.

Economic Development: Economic development refers to the sustained, long-term improvement in a country's economic performance and living standards. It encompasses various indicators such as economic growth, poverty reduction, employment creation, infrastructure development, and social welfare enhancement.

Fiscal Management: Fiscal management pertains to the management and administration of government finances, including revenue collection, expenditure allocation, budgetary planning, debt management, and fiscal policy formulation. Effective fiscal management is essential for ensuring fiscal sustainability, macroeconomic stability, and efficient use of public resources.