Relationship between Tax Policy, Growth of SMEs and the Nigerian Economy

Ojochogwu Winnie Atawodi,Stephen Aanu Ojeka

doi:10.5539/ijbm.v7n13p125

Ojochogwu Winnie Atawodi, Stephen Aanu Ojeka

Open Access

https://doi.org/10.5539/ijbm.v7n13p125

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Abstract

This research work tries to establish if any relationship exists between the growth of SMEs and the tax policyenvironment within which they operate. Using business sustenance and expansion as indices of growth, itanalyzes responses obtained questionnaires distributed to SMEs in Zaria, North Central Nigeria. Sampling forthe survey was done using the non-probability sampling method specifically by judgmental sampling. Thehypothesis was tested using Spearman’s Rank Correlation. Although there is a general perception that that tax isan important source of fund for development of the economy and provision of social services, the study revealeda significant negative relationship between taxes and the business’ ability to sustain itself and to expand. In orderto obtain a vibrant and flourishing SME sector, the tax policy needs to be appropriate such that it will not be anencumbrance to the growth of small and medium enterprises.

Highlights

Small and medium enterprises (SMEs) form the core of majority of the world’s economies
From the foregoing, it can be concluded that Small and Medium Scale Enterprises (SMEs) play an important role in the growth and development of the Nigerian economy
It can be concluded that a friendly tax policy is instrumental to the survival and growth of these small and medium enterprises

Summary

Introduction

Small and medium enterprises (SMEs) form the core of majority of the world’s economies. A study carried out by the Federal Office of Statistics shows that in Nigeria, small and medium enterprises make up 97% of the economy (Ariyo, 2005). They are the most important enterprises in the economy due to the fact that when all their individual effects are aggregated, they surpass that of the larger companies. Panitchpakdi (2006) sees SMEs as a source of employment, competition, economic dynamism, and innovation which stimulate the entrepreneurial spirit and the diffusion of skills. Because they enjoy a wider geographical presence than big companies, SMEs contribute to better income distribution

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