Taxation and the Growth of Small and Medium Enterprises in Nigeria

Victor E. Inim, Francis Sylvanus Udoh and Uzoma Samuel Ede

Asian Journal of Social Sciences and Management Studies, 2020, vol. 7, issue 3, 229-235

Abstract: This study examines the impact of taxation on the growth of Small and Medium Enterprises (SMEs) in Nigeria from 2007 to 2019. Data was gathered from the Central Bank of Nigeria Statistical Bulletin and Small and Medium Enterprises Development Agency of Nigeria (SMEDAN). The study adopted the co-integration and error correction modelling as its technique of analysis. While Company Income Tax (CIT) and Value Added Tax (VAT) were found to have significant impact on the growth of SMEs in Nigeria, Custom and Excise Duty (CEDT) was found to have insignificant impact on their growth. As expected however, the three variables, CIT, VAT and CEDT were found to be inversely related with SMEs growth. The study therefore recommends among others, that for taxation to grow the SMEs, tax policies especially those relating to CIT and VAT should be properly formulated and carefully administered in such a way that such policies directly promote the growth of SMEs. In particular, the government should consider a downward review of the current VAT rate of 7.5%. In addition to reducing tax rates for the SMEs, other incentives, reliefs and allowances such as loss reliefs, pioneer status, tax holidays, capital allowance etc. should be specially packaged for SMEs to enhance their productivity and growth.

Keywords: Taxation; Value added tax; Custom; Excise duty; Company income tax; SMEs. (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:aoj:ajssms:v:7:y:2020:i:3:p:229-235:id:1963

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