Tax Incentives and the Growth in Sales Revenue of Small and Medium Enterprises (SMEs) in Ondo and Ekiti States, Nigeria

Abstract

The growth of Small and Medium Scale Enterprises (SMEs) had been considered a vital factor in the economic development of any country especially with regard to creation of employment and contribution to the growth of Gross Domestic Product. The growth of SMES was however hindered by challenges ranging from the lack of financial resources to expand, inadequate infrastructural facilities, lack of support from the government, harsh business environment, and above all, unpleasant taxation policy of the government creating enormous tax burdens to the SMEs. Tax Incentives had been perceived to influence the growth of small and medium enterprises (SMEs). In the light of all these, this paper reviewed the effect of tax incentives on the growth in sales revenue of Small and Medium Enterprises in Ondo and Ekiti States, Nigeria. The study employed survey design. The study population comprised SMEs registered with Small and Medium Enterprise Development Agency of Nigeria in Ondo and Ekiti States, with the total of 2,708. The Taro Yamane formula was used to obtain a sample size of 386. The owners/managers, employees, accountants and auditors of these SMEs were selected through a multi-stage sampling technique which involved the stratified, proportionate, and simple random sampling methods. Descriptive and inferential statistics were used to analyse the data. The results showed tax incentives (investment allowance, tax holiday, tax credit and tax deferment) have a significant positive effect on the growth in sales revenue of SMEs, <i>F₆₇₉=313.815, Adj. R²=0.759, p-value=0.000<0.05</i>. Hence, the study concluded that tax incentives proxies, of investment allowance, tax holiday, tax credit and tax deferment were significant determinants of the growth in sales revenue of SMEs in Ondo and Ekiti States, Nigeria.