Taxation and Investment Climate in Anambra State: A Study of Small and Medium Enterprises in Awka

The tax environment in which businesses operate is a critical determinant of investment attractiveness, enterprise survival, and long-term business formation. This study examines the relationship between the taxation regime and the investment climate for small and medium enterprises (SMEs) in Awka, Anambra State, covering the period 2021 to 2024. The study is theoretically anchored on Optimal Taxation Theory, which argues that a well-designed tax system minimizes economic distortion while generating sufficient revenue for public financing, thereby creating a conducive environment for investment. A survey research design was adopted, targeting SMEs registered with the Anambra State Board of Internal Revenue. From an estimated population of 5,200 registered SMEs in Awka, a sample of 358 respondents was selected using stratified random sampling. Structured questionnaires and tax compliance records served as data instruments. Findings reveal that 74 percent of surveyed SMEs identified multiple taxation by overlapping government tiers as the most significant tax-related disincentive to investment expansion. High effective tax rates, poor tax administration transparency, and arbitrary levies by local government agents were also cited as major grievances. The study concludes that the current taxation environment in Awka presents a notable deterrent to SME investment and growth. It is recommended that Anambra State harmonize its tax structure across all government tiers, eliminate redundant levies, and deploy automated tax administration platforms to improve compliance and investor confidence.

Keywords: Taxation, investment climate, SMEs, Awka, Anambra State