Tax incentive and growth of informal sector small and medium enterprises in South West Nigeria

Tax incentive and growth of informal sector small and medium enterprises in South West Nigeria

Author by Dr. Folajimi Festus Adegbie

Journal/Publisher: International Journal Of Creative Research Thoughts

Volume/Edition: 8

Language: English

Pages: 4088 - 4098

Abstract

The informal sector Small and Medium Enterprises (SMEs) growth is very important to the development and
expansion of an economy. Studies have revealed that SMEs in the informal sector are liquidated at infant stage and
also not captured in the tax net. The study examined the impact of tax incentives on the growth of SMEs in the
informal sector of South West, Nigeria. The study used survey research design. The population consisted of 2,708
registered SMEs with Small and Medium Enterprises Development Agency SMEDA. Using stratified and
proportionate quota sampling method to administered questionnaire to 386 selected samples. The study administered
772 copies of the questionnaire with a retrieval rate of 88%.Reliability ranged between 0.70 and 0.87.Descriptive and
inferential statistics were used to analyze the data.The results showed that tax incentives have significant impact on
gross margin growth with Adj. R2 =0.890;F-statistics of 455.530 and p-value of 0.000.Also tax incentives have
significant impact on asset tangibility growth with Adj.R2 of 0.781,F-Statistics =60.220 and p-value =0.000.The
study concluded that tax incentives have the predictive power to grow the informal sector SMEs in Nigeria. The
study recommended that Federal Inland Revenue Service and State Internal Revenue Board should introduce policies
that enable the SMEs in the informal sector to be captured in the tax net through tax incentives. The will expand the
tax revenue generation to both the federal and state governments of Nigeria
 


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