JIMMA UNIVERSITY

COLLEGE OF BUSINESS AND ECONOMICS

DEPARTMENT OF ECONOMICS

ASSESSMENT OF TAXATION AND ITS IMPACT ON SMALL BUSINESS IN

CASE OF AMBO TOWN

A RESEARCH PAPER SUBMITTED FOR PARTIAL FULFILLMENT ON

THE REQUIREMENT FOR BACHILOR ART (BA) IN ECONOMICS

PREPARED BY:

ADVISOR: NEGESE TAMIRAT (MSc)

July, 2019
 Table of content

Contents pag

e
CHAPTER ONE..................................................................................................................1
INTRODUCTION...............................................................................................................1
1.1.Backgroundofthe Study..............................................................................................1
1.2. Statement of The Problem.........................................................................................3
1.3. Objective of the Study...............................................................................................4
1.3.1. General Objective of The Study........................................................................4
1.3.2. Specific Objective Of The Study........................................................................4
1.4. Research question.....................................................................................................4
1.5. Significance of the Study..........................................................................................4
1.6. Scope Of The Study.................................................................................................5
1.8. Organization the Paper..............................................................................................5
CHAPTER THREE...........................................................................................................16
3. RESEARCH DESIGN AND METHODOLOGY.........................................................16
3.1. Description of the Study Area.................................................................................16
3.2. Research design.......................................................................................................16
3.3.Method of data analysis...........................................................................................16
3.4.Sampling Technique................................................................................................16
3.5.Source of data and types of data..............................................................................17
3.5.1. Questionnaire....................................................................................................17
3.5.2. Interview...........................................................................................................17
3.6. Sampling methods and sampling size.....................................................................17
3.6. Methods of Data Analysis and Presentation...........................................................18
3.6.1. Methods of Data Analysis................................................................................18
3.6.2. Methods of Data Presentation..........................................................................18
CHAPTER FOUR.............................................................................................................19
4. Time Schedule and Budget Breakdown........................................................................19
4.1 Time Schedule........................................................................................................19
4.2. Budget Breakdown................................................................................................20
Reference...........................................................................................................................21
Appendix…………………………………………………………………………………22

Abstracts

Abstract It must be including Introduction, Methodology, Result and conclusion

- The main aim of this study was to examine the taxation & its impact on small
business such as shops & recreational center. The researcher used both
primary and secondary data. Primary data was collected through interview and
secondary data was collected from different written materials. Based on the
analysis the researcher recommended that it is better if it consider the ability
of small business and other the tax authority when they impasse tax. To
determine impact of taxation on small business growth , evaluate the effect
of taxation on small business to reinvestment activities of business and find
the application of ability to pay principle on small business enterprise
Key word. Taxation, small business

BOARD OF EXAMINERS

Approved Signature

Advisor_____________ __________________

Examiner____________ ___________________

Examiner_____________ ___________________
LIST OF TABLES, CHARTS AND GRAPHS

Table 4.1.Financial problems to pay tax on time …………………………….19

Table 4.2.Impact of current tax on business growth …………………………20

Table4.3. Tax ability to pay principle ……………………………………….21

Table 4.4. Average amount of tax paid year…………………………………21

Table 4.5.Current tax proportional with income or not………………………22

Table 4.6.currently pay tax as property ………………………………………23

Table 4.7.Daily average income of small business …………………………..23

Table 4.8.impact of tax on reinvestment ……………………………………..24

Table 4.9.Impact of current tax on business expansion……………………….25

Table 4.10 future aim of operate business ……………………………………26

 CHAPTER ONE
INTRODUCTION
1.1. Background of the Study
Taxation is a system raising money to finance governments’ service activities. All
government requires payments of money taxes from people. The government uses the
taxes revenue to build dams and roads to operate schools and hospitals to provide
food and medical care for the poor and hindered of other purpose. Without tax fund
government activities could not exist.

Taxation is a system of compulsory contributions levied by government on persons,

corporations, and properties, primarily as a source of revenue for government’s
expenses and other public purposes. It is for this reason, in order for the government
to provide the public with the necessary goods and services, revenue must be raised
through taxation.
This revenue is generated through direct and indirect forms of taxation. Direct taxes
are paid on income. This effectively means that the more income you earn the greater
your contribution is expected to be to the state. Indirect taxes are levied on
expenditure. This tax is imposed on the basis of the individual consumption – the
individual pays only on what he consumes. However, it must be noted that taxation is
used not only to raise revenue but also to regulate consumption and may even be used
to curtail various forms of business activities. For instance, alcoholic beverages and
tobacco may be taxed heavily on the grounds that their use is hazardous to the health
of individuals. Such revenue, often called a “sin tax”, is in fact a penalty paid by the
users of the reference.

The regulatory aspects of taxation are more apparent in indirect taxes, such as
customs duties and taxes, than in direct taxes such as income tax. For instance,
government can control private consumption, especially of imported goods, by
increasing customs tariffs. An increase in taxation on personal income on the other
hand, may result in a decrease in private savings without affecting the level of
consumption.The effectiveness of any government depends on the willingness of the
people governed to surrender or exchange a measure of control over their persons and
property, in return for protection and other

1
Services. Taxation is one form of this exchange. In designing tax systems,
governments customarily consider three basic indicators of taxpayer wealth or ability
to pay: what people own, what they spend, and what they earn. The kinds of taxes
raised by government for revenue are numerous. The most common are: personal
income taxes, corporate income taxes, property taxes, sales taxes, death and gift taxes,
and import-export.

In order for a tax system to operate effectively, certain principles must be put in place.
Fairness: the tax must be fair, that is, citizens should be taxed in proportion to their
abilities to pay. Clarity and Certainty: Convenience: the application of a tax should be
clear and certain. If the application is uncertain and arbitrary the public can have no
confidence in the system. Compliance with tax laws may increase if it is easy and
convenient. Efficiency: a good tax system should be structured so that it can be
administered efficiently and economically. Taxes that are difficult or costly to
administer divert resources to nonproductive uses and diminish confidence in both the
levy and the government.

In the past taxation was regarded solely as a means to finance the necessary
obligations of a government. The money was used to pay elected officials, maintain
state security, build roads, bridges and public buildings; and pay for such services as
schools, hospitals and fire fighters. In recent times, the purposes of taxation have
expanded considerably, as have the roles of governments in society. Today taxes have
three functions. First and foremost, to provide the money that makes it possible for
government to function. Second, taxes have an economic significance: they are used
to promote goals such as full employment, satisfactory rates of economic growth, and
stability of the money supply. The economic goals of taxation are achieved by raising
or lowering tax rates. The fewer taxes people pay, the more they have for their
personal use. Conversely, the more taxes they pay, the less money they have available
for themselves. Third, taxes are used as a redistribution of wealth. The purpose of
income redistribution is to lessen the inequalities of wealth in society. This is done
through what is called a system of transfer payments. The effect of the system is to
transfer money from those who have a good deal of it to those who have very little.
Two of the most common examples are social security payments and welfare

2
payments made to people who, for one reason or another, do not work.
(W.begond,2013)
Oromia Revenue Bureau is one of the Oromia regional state sector Bureaus which has
the responsibility and duties to collect the revenue generated within the region. To
perform this responsibility the bureau structured in 18 zone, 39 city administration
and 300 woreda revenue offices. Ambo town revenue office is one of the town of
Oromia regional state the office organized in three core process and one supporting
processes, namely, Collection and Monitoring Core process, Audit and Enforcement,
and Taxpayers Education and compliance handling core processes and administration
supporting process.

Ambo to have full of infrastructure like; electric power, network, rood, university
school, hospital water supplier but not enough. Because of this, many small business
activities are found in this town. Among the small business activity found in the town
the research focuses his study on taxation its impact on small business such as
recreational center (Restaurant) and shops. Here in the town there were 100 owners
shops and recreation center (Restaurant), among 100 total populations of shops and
recreations center (restaurant) in the town. 68 of them are the owners of shops and 32
of them are the owners of recreational center (Restaurant).

1.2. Statement of the Problem

According to Victoria Perry and Katherine (2003) and cited by Lamessa Bayisa, taxes
are the back bone of any politico-economic regime. Constrains on a government’s
power to tax are constraints on its power to act. The levying of taxes is, therefore, a
central function of government in all countries of the world and while systems and
methods vary widely according to the political, economic and social characteristics of
individual countries the requirement for a sound tax administration remains broadly
the same.
In line with this concept the government of FDRE has made tax reform to modernize
tax administration in order to establish the sustainable domestic base that is needed to
finance the country’s socio political and economic development to alleviate poverty,
to encourage trade, investment and market to ensure fairness; equity and consistency
in tax administration of the Ethiopian tax law.

3
For effective implementation of this program the current Ethiopia government power
has been decentralize and empowered the lowest budget administrative levels - the
woreda – to enable local government to raise and utilize their own revenue so as to
administer their budget, finance public expenditure such as health, education,
infrastructure and so on. Based on federal government income tax proclamation No.
286/2002, Oromia regional state issued income tax proclamation No. 74/2003, as well
as TOT proclamation No. 75/2003.

1.3. Objective of the Study

1.3.1. General Objective of The Study

- To evaluate how taxation affects the activity of small business enterprise

found in Ambo town.

1.3.2. Specific Objective of the Study

- To determine impact of taxation on small business growth

- To evaluate the effect of taxation on small business to reinvestment activities
of business

1.4. Research question

What are the main indicators of income tax collection in Ambo town revenue office?

1. How can taxation affect the activities of small business growth?

2. To see the effect of taxation on small business to reinvestment activities of
business?

1.5. Significance of the Study

The study basically designed on the impact of taxation on small business. This design
was believed to give advantages for governments as well as owner of small business.
The owners of small business know the impact and advantage of taxation on their
business and to give some feasible solution with the problem on their businesses.

4
The study also enables other researchers and university students as a reference. It also
enables the researchers to have academic knowledge of conducting project and also to
get partial fulfillment of the requirement for Bachelor of Arts degree in economics.

1.6. Scope of the Study

Delimitation of the study means its ranges of action or area of influencing of the study
.in this case study would give bounded (emphasis) on taxation and its impact on small
business in case study of shop recreational center (Restaurant) in Ambo town .This
study would be performed on some shop and recreational center found in the town
those selected by the researcher for the study purpose in the area where shop. And
recreation center are density population in the town.

1.8. Organization the Paper

The research paper incorporates five chapters .The first chapter is introduction, back
ground of the study statement of problem, objective of study, significance of study,
scope of study, limitation of study and organization of the paper.

In the second chapter literature review, third chapter methodology, data type, method
of data collection, method of sampling and population size, in chapter four deals with
data analysis and presentation, the last chapter presents conclusion and
recommendation part of the study .

5
 CHAPTER THREE

3. RESEARCH DESIGN AND METHODOLOGY

3.1. Research design
The research design was plan in such a way to provide for proper performance of the
research. It helps for analyzing the data which was collected through various methods
of collecting data . Based on the data which are relevant for the study, the research
design used for the study was descriptive study method because to describe the
characteristics of objects, peoples, group, organizations or environments. The
researcher woud be selected descriptive study because it is appropriate for researcher
in consuming less time and helps to answer the research questions which are factual in
nature and helps to go further and draw conclusion from the data. Luttmer, E.,
&Singhal, M. (2014).Tax Morale.

3.3. Method of data analysis

The data analysis method would employed both quantitative and qualitative data. The
quantitative data employs to analyzed the data in descriptive statistics and parameter.
The data that would be organized would have done by transferred data in to table,
graph, and percentage would have been used to analyzed and interpreted the
descriptive method. In addition, the descriptive analyzed utilizes the element of
quantitative and qualitative research methodologies. These studies would be used
quantitative method of data analysis for questionnaires presented in table by the use of
frequency and percentages.

3.4. Sampling Technique

In this study, we would use a simple random sampling technique type of probability
sampling. The reason why this sampling techniques would used was due to simple
random sampling was the simplest and easiest method, less complicated to collect the
data, less expensive, less time consuming, unbiased and enables us to get the required
data only from concerned bodies. In addition to those, each element of the population
had an equal chance of being selected into the sample.

6
3.5. Source of data and types of data
1. Both primary and secondary data type would used for the study. Primary data
would collected from small business owner’s view and opinion used interview by
translating English to Afan Oromo Language for respondent. The secondary data
would be collected from reports & written documents from Ambo town revenue
office.

3.5.1. Questionnaire
The questionnaire would had both open-ended and closed-ended questions that were
prepare in English language and Afan Oromo, to collect data that was relevant to the
studied. The questionnaire would be distributed among the residents of ambo town
and we would analyze the result accordingly.

3.5.2. Interview
We would prepare semi-structured interview. The interview schedule would be
prepared to collect data, which is relevant to the study in addition to questionnaire.
We through face-to-face contact collected the data through interview with key
informants. These key informants include. Ambo town tax administration and certain
production about taxes some needed articles, policy and procedures of taxes that that
provided by revenue authorities are also used
3.6. Sampling methods and sampling size

The sampling methods would collected data from the payer’s would probability
sampling. When data collected from payer of shops and recreational center
(restaurant) research would types of probability sampling techniques to identify target
population.

3.6. Methods of Data Analysis and Presentation

3.6.1. Methods of Data Analysis
The primary and secondary data gathered from different sources would be analyzed
by used different data analyzed techniques. Quantitative data would be analyzed
descriptively by using classified and count them, and insert to Microsoft Excel to
construct different statistical tools like percentage, average and ratio, while a
qualitative data would be discussed and analysis qualitatively in a way it presents the
information appropriately.

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3.6.2. Methods of Data Presentation
After the data would be gathered and analyzed, it would be presented used different
data presentation tool, such as tables, figures, chart, graphs and photographs
accompanied by textual discussed qualitatively and quantitatively. Analyzed
quantitative data or quantifiable data as well as the respondents’ response on the given
variable would be presented in the form of sums, percentage and ratio by using tables,
figures, charts and pictures accompanied by textual discussion, while the analyzed
qualitative data will be presented textually in descriptive form.

8
 CHAPTER FOUR

1. Data Analysis Presentation and Interpretation

The analysis and interpretation of this paper is based on primary data by using
stratified sampling method to identify the number of shops and recreational center
(restaurants) from the total population of 100 shops and recreational center in Ambo
town.

1.1.1. Financial Problem Because Of High Taxes Rate to Pay on

Time

A response of the business owners financial problem is there to pay to on limit time
has impact on their business growth or not.

Table 4.1.Financial problems to pay tax on time

Response Shop Restaurant

No of In present ( %) No of In present (%)
Respondent Respondent
Yes 11 73.3% 3 60%

No 4 26.7% 2 40%
Total 15 100% 5 100%

This table 4.2.Indicates that above 11(73.3%) of the shop had financial problems to
pay tax on time b/c of high tax rate. Whereas 4(26.7%) of the respondents from the
interview replied there is no financial problem to pay tax on time b/c of high tax rate.
And when observed recreational center (restaurant ) side 3(60%) of total sample size
replied there is financial problem to pay tax on time and 2(40%)total sample size
replied there is no financial problem topay tax on time b/c of high tax rate.

So that the business owners of shops and recreational center (Restaurant) Reponses
that there is financial problems to pay tax on time b/c high tax rate.

9
 1.1.2. The Impact of Current Tax on the Business

The Reponses of the business owners of shops and restaurant about taxation have
impact not on their business.

Table 4.2.Impact of current tax on business growth

Response Shop Restaurant

No of In present (%) No of In present (%)
Respondent Respondent
Yes 12 80% 4 80%

No 3 20% 1 200%
Total 15 100% 5 100%

As the table 4.2.Indicates 12(80%) and 4(80%) had a negative impact on owners of
shops and restaurant respectively. Whereas 3(20%) and 1(20%) had positive impact
on operation of their business growth .There for the majority of business owners said
the current tax system have negative impact on their business.

1.2. Problems Related With Ability to Pay Principles

Under this topic researcher asked the business owners of shops and restaurant five
questions about tax paid according to their ability to pay principles.

1.2.1. Currently Tax Paid Is Ability To Pay?

Response of business owners about tax as ability to pay or not as ability to pay

Table 4.3. Tax ability to pay principle

Response Shop Restaurant

No of In present (%) No of In present (%)
Respondent Respondent
Yes 4 26.7% 1 20%

No 11 73.3% 4 80%
Total 15 100% 5 100%

10
As the table 4.3 indicates that 4(26.7%) and 1(20%) of the interviews repose shows
respectively owners of shops and restaurant that the tax pay system is ability to pay.
Whereas 11(73.3%) and 4(80%) respondents replied tax pay is not as ability to pay
principles.

Therefore a majority of business owners of shops and restaurant response show that
currently tax paid is not as ability to pay principle.

1.2.2. Average Amount of Tax Paid Per Year

Table 4.4. Average amount of tax paid year

Average of paid Shop Restaurant

per year No of In No of In present(%)
Respondent present( %) Respondent
Below birr 50 - - -
Birr 501-1500 1 6.7% -
Birr1501-3000 2 13.3% -
Birr3001-6000 1 6.7% 1 20%
Birr6001-12000 4 26.6% 1 20%
Above 12000 7 46.7% 3 60%
Total 15 100% 5 100%

As shown on table 4.4 above the amount of tax paid per year of the business 1(6.7%)
owners of shops pay tax year of birr 501-1500 and 2(13.3%) , 1(6.7%), 4(26.6%) and
7(46.7%) of them are pay tax of birr 1501-3000, birr 3001-6000, birr 6001-12000&
above 12000 respectively. Also from the respondent of the respond owners shown
1(20%), pay taxes birr 3001-6000, 1(20%) pay tax birr 6001-12000 and 3(60%) of
them are pay tax birr above 12000 birr respectively.

According to data collected, a business owner of shop and restaurant in town pay tax
per year is inadequately. That means the above table is explained the average amount
tax paid per year at high amount tax rate (above 12000) for these reason has negative
impact on small business.

11
 1.2.3. Tax vs. Income

Responses of tax payers for the above current tax proportion has on income or not is
answered as follows.

Table 4.5. Current tax proportional with income or not.

Response Shop Restaurant

No of In present (%) No of In present (%)
Respondent Respondent
Yes 5 33.3% 2 40%

No 10 66.67% 3 60%
Total 15 100% 5 100%

As shown on the above table 4.5 from the interviews of the researcher to the shops
owners the respond as follows from the total population of shops owner 5(33.33%) of
them were responded to the researcher as currently they pay tax proportion to their
income when they compared to the last year and 10(66.67%) of them are responded
currently the amount paid was not proportion to the income. In case of restaurant
owner, the respond the researcher 2(40%) of restaurant owner are currently paid tax
proportion to their income and 3(60%) of the respondents answered that tax system
are still not proportion to their income. So that the most business owners responded to
the researcher as current tax paid was not proportion so their income.

1.2.4. Currently Pay Tax as Property

Response of tax payers for the above current pay tax as property or not is discuses as
follows.

Table 4.6.currently pay tax as property

Response Shop Restaurant

No of In present (%) No of In present (%)
Respondent Respondent
Yes 5 33.3% 2 40%

12
No 10 66.67% 3 60%
Total 15 100% 5 100%

Table 4.6 indicates that 5(33.33%) of respondents’ said current tax pay is our
property. whereas 10(66.67%) of replied currently pay tax we pay is not as our
property. In case of restaurant owners the respond to researcher 2(40%) currently pay
tax as they property and 3(60%) are not as property.

So that the most owner of business respond to the researcher current tax they paid as
not as or according to their property.

1.2.5. Average of Daily Income

The average of daily income of business owners mentioned as follows

Table 4.7.Daily average income of small business

Average Daily Shop Restaurant

Income No of In present No of In present (%)
Respondent Respondent
( %)
Below birr 100 5 33.33% 2 40
Birr 101-500 6 40% 2 40
Birr501-1000 4 26.67% 1 20
Birr1001-1500 - - - -
Birr1501-2000 - - - -
Above 2000 - - - -
Total 15 100% 5 100%

Table 4.7 the amount of daily income of business owners 5(33.33%) of shops owners
daily income of birr below 100&6(40%), 4(26.67%) average daily income 101-500,
501-1000 are respectively .Also respondent from restaurant owners 2(40%) of
restaurant owners daily income of birr below 100 birr, 2(40%) of birr 101-500 and
1(20%) birr 501-1000 respectively.

13
Generally the majority of respondent have low average daily income because of low
daily income current tax system has negative impact on small business owners.

1.3. Problems Relates With Reinvestment

This topic researcher asked the business owners of shops and restaurant three
questions about impact of tax on reinvestment. This question is interpreted and
analyses as follows.

1.3.1. Impact of Tax on Reinvestment

Responses of the small business owners about taxation have impact on reinvestment
or not.

This shown on the following table.

Table 4.8.impact of tax on reinvestment

Response Shop Restaurant

No of In present (%) No of In present (%)
Respondent Respondent
Yes 12 80% 4 80%
No 3 20% 1 20%
Total 15 100% 5 100%

As shown on the above table 4.8 indicates that about 12(80%) of shops had negative
impact on the activity of their business reinvestment, where as 3(20%) of the
respondents from the in-services realized positive impact on the operation of their
reinvestment and incase of restaurant owners 4(80%) of the total sample size shows
that the current tax system have negative impact on their reinvestment and 1(20%) of
the total sample size replied for the interview as a positive impact- either business
reinvestments and carry out their operation .

In this research case researcher get the idea from data collected. The majority of small
business owners has a great problem on reinvestment b/c of their pay high amount of
tax rate.

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 1.3.2. Impact Current Tax on Business Expansion

Responses of small business owners about taxation have impact on business

expansion or not are listed below table

Table 4.9.Impact of current tax on business expansion.

Response Shop Restaurant

No of In present (%) No of In present (%)
Respondent Respondent
Yes 13 86.67% 5 100%

No 2 13.33% - -
Total 15 100% 5 100%

As shown on the above table 4.9 dictates that about 13(86.67%) of shops hold a
negative impact on the business expansion. Where as 2(13.33%) of the respondent
from the interview replied positive impact on the business expansion and when
observed in the restaurant side,5(100%) of total sample size replied for interview the
current tax system have negative impact .on business expansion .In general current
tax system has negative on small business to expand their business.

1.3.3. Future aim of to operate business

Respondent where asked about future aim to operate business, continuous as its,
continues with expansion and discontinues the table below illustrates the response.

Table 4.10 future aim of operate business

Response Shop Restaurant

No of In present (%) No of In present (%)
Respondent Respondent
Continuous as 1 6.67% 1 20%
its
Continuous with - - 4 -
expansion

15
Discontinuous 14 93.33% 5 80%
Total 15 100% 100%

According to table 4.10 among the future aim of business operation 1(6.67%) of shop
owners continues as it is there business, no shop of owner continues with expansion
of business & 14(93.67%) was discontinues to operate their business. Also in case of
restaurant 1(20%) of restaurant owners are continues their business has it is & 4(80%)
respondents answered discontinuous/closed their business operation.

From the study, has a whole small business 85% them discontinues their business as
operation because of impact high tax rate & 15% business owners continuous as it is

1.4. Interview for Manager of Ambo Revenue Authority

In addition to the question for the owners of shop restaurant while collecting data,
researcher asked interview question for the manager of tax authority of the town. The
response of manager was analyzed as follows.

1. Researcher asked the manager how they evaluate the knowledge of small
business owners. Also he answered to the research the knowledge of tax
payers of shops and restaurant be evaluate in different ways many times we
have a meeting with a tax payers at that time one who have knowledge about
taxation was rise negative ideas. So the knowledge of tax payers can be
evaluated by idea they rise. On the other hand the knowledge to tax payers can
be evaluated by paying their tax liability on time. If the owners of small
business have full knowledge about taxation always they are voluntary to pay
their liability on time. But if they have small knowledge they not voluntary to
pay their liability on time.
2. The researcher asked the manager of the organization as owners of shops and
restaurants their tax liability on time. He answered to the researchers the tax
payers of many owners of shop and restaurants were paying their tax liability
on time. But same times late to pay their tax liability on time when this was
happen the employee of the organization call them and teach about taxation, if
another time they late to pay give warning to the small business owners.

16
Thirdly the manager was asked by the researcher the feelings of the employees of
organization to teach tax payers about tax. He responds to the researchers the
employees of the organization has positive attitude to teach about taxation to tax
payers and give awareness to tax payers lastly the researcher asked manager of tax
authority have impact on small business. He respond to the researcher taxation is one
of the sources of finance for the government of the country to construct infrastructure
like hospital, school, road, water utility for the society.

The owner of the small business was one part of the society .so, they pay tax to
construct their environment indirectly by paying the tax to the government. In general,
paying tax to the government is the responsibility of every person in the society to
develop the economy of the country. So that taxation has no impact on small business
rather they play their role for the development of their country.

CHAPTER FIVE

2. SUMMARY OF FINDINGS, CONCLUSION AND

RECOMMENDATION

This chapter presents a summary of findings, conclusions and recommendation of

finding as customer service and retention are constructed.

17
 2.1. Summary of Finding

This aimed at determining the taxation and its impact on small business in Ambo
town .the results leveled that the impact of taxation on small business is quite negative
impact on small business. The study for their released that taxes mainly affects the
small business through for business growth, business reinvestment and expansion and
pay high amount of tax rate.

2.2. Conclusion

The researcher concluded that a tax has the major limitations on the business
growth .expansion and reinvestment of small business in Ambo town. Those major
limitation on small business owners is financial problem to pay tax paid is not as
ability to pay principle and not proportion with the income of business owners of
shops and restaurant are not well developed because of different limitation such as
lack of knowledge financial problems tax and others .from that limitation tax is the
major one . The estimated amount of presumptive tax and the activity of businesses
are in balance. The taxation in current year was relatively higher as compared with in
the previous year’s majority of tax payers respond to the researcher. The assessment
of tax for the small business in done tax presumptive by the specified committee full
authority is given to the committee to impose the amount of tax each business to pay.
The tax paid by the small business is many times not proportional with their income
and business owners stopped to pay tax for the government .Generally currently tax
paid has negative impact on small business of shop and restaurant owners

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back bone of any politico-economic regime.

18
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