Tax Collection, Utilization Systems and the Performance of Small and Medium Scale Enterprises in Nigeria: A Multivariate Approach

In both developed and developing nations, there are a number of empirical studies that had assessed the roles tax revenues play in augmenting economic growth; however, there is a literature gap on what is known about tax collection and utilization system and their effects on small and medium scale enterprises’ performance in developing country like Nigeria. In line with the above, this study was carried out with the view to assess the relationships between tax collection and utilization systems and the performance of small and medium scale enterprises in Nigeria. The theories of expediency and benefits received from tax revenues were employed as the theoretical underpinning and the descriptive survey design involving questionnaire was used. A sample of 190 employees and 50 owners of small and medium scale enterprises were employed, hence the study sample comprised of 240 respondents. The dependent variable is small and mediums scale performance (measured by quality of service, profitability and turnover) while the independent variables are tax collection and utilization systems. Data obtained in the survey were analyzed using descriptive statistics (mean, standard deviation, and Karl Pearson correlation); diagnostic statistics (variance inflation factor) and inferential statistics (multivariate regression). In specific, the multivariate regression result indicated that tax collection and utilization systems negatively and significantly affect SMEs performance in areas of quality of service, profitability, and turnover in Nigeria. It was recommended that Nigerian government should put stringent mechanisms aimed at enhancing the collection and utilization of tax revenues and more importantly, multiple tax collections that seek to frustrate small and medium scale enterprises’ performance should be adequately addressed.