Tax incentive and the growth of small and medium entrprises in case of ambo town.

Abstract

The study analyzes the benefits of tax incentive on the growth of small and medium-sized enterprises (SMEs) in Ethiopia, taking SMEs in Ambo town as a case study. In this SMEs growth is hindered by the challenges of lack of financial resources to expand, the entrepreneur managerial skills/attitudes, inadequate infrastructural facilities and above all unpleasant taxation policy of the government. In the light of all these, this study reviews the role being played by various governmental tax incentives on the growth of SMEs. The study employed descriptive research design and inferential statistic thus; primary data was collected on variables contributing to tax influence and their benefits on the growth of SMEs. The purpose of this study has been to analysis tax incentive and the growth of SMEs at Ambo town. A sample of 230 was collected from owners and organization on the growth of SMEs at Ambo town during Descriptive statistical measures, chi square and binary logistic regression model were used for the analysis in the study. The result of the study disclose that majority of SMEs (79.1%) them did benefits from tax incentive but only around (20.9%) of SMEs were not benefits from tax incentive, Out of the SMEs who have benefits from tax incentives, 50 % and 29.13 % were male and female respectively. The log odd that who benefits using tax incentive for the growth of SMEs in the Diploma increased by 33% as compared to primary school controlling variables. Therefore, it is more advisable if Government and tax authorities should carefully consider and revisit the benefits of tax incentive policy to determine effective types of tax incentive and its implementation. It is better in encouraging SMEs should be educated on the importance and benefits for them to apply for the tax incentive.