The Effect of Tax Incentives Practices on Sustainability of Micro, Small and Medium Enterprises in Ethiopia During the Outbreak of Corona Virus Pandemic

Abstract

Purpose: The aim of this study was to identify the effect of tax incentive practise on sustainability of MSMEs during outbreak of corona virus pandemic in Ethiopia. Design/methodology/approach: In order to achieve this objective, the researchers have employed quantitative research approach with explanatory research design in which six hypotheses have been tested. The primary data was collected from 300 respondents using structured questionnaires. Multiple regression model was employed to identify the effect of tax incentives on sustainability of MSMEs in Ethiopia. Findings: According to the regression analysis, this study revealed that tax holiday, tax allowance, reduction in tax rate, accelerated depreciation, loss carry forward and tax exemption have positive and statistically significant effect on the sustainability of the MSMEs. Based on the finding of the study was concluded that the existence of tax incentive practice has positive contribution to sustainability of the micro, small and medium sized enterprise.Research limitations/implications: The current study was geographically focus on Ethiopia by considering the micro, small and medium sized enterprises sector. The subject wise was focused on the effect of the tax incentives:(tax holiday, tax allowance, tax exemption, and accelerated depreciation, reduction in tax rate, and loss carry forward) and on the sustainability of MSMEs. The study used primary data which is limited to a year of 2020. It might be improved in the future if other researchers incorporate large firms in the country and uses secondary data for analysis. Practical implications: To survive, micro, small and medium scale enterprises need the support from the government in the form of tax incentives. The role of tax incentives in enhancing the growth of micro, small and medium sized enterprises is very significant on the sustainability of MSMEs as well as the economy as a whole. Hence, the findings and recommendations of the current study might serve as an ingredient and be informative to the policy makers on MSMEs sector. It might also give a general insight to the policy makers, academician and professional groups of society and the public at large with regard to the role of effect of tax incentives on the sustainability and growth of MSMEs during outbreak of coronavirus.Originality/value: This study contributes to empirical evidence about the effect of tax incentives practices on sustainability of micro, small and medium enterprises in Ethiopia by considering tax incentive practice in terms of tax holiday, tax allowance, reduction in tax rate, accelerated depreciation, loss carry forward and tax exemption. As tax incentives theories supported the findings of this study, we have concluded that tax incentive practices provided by government have positive contribution for the sustainability and growth of micro, small and medium sized enterprises in Ethiopia

Impact of Micro Business Enterprise Act on the Growth and Development of Micro-Entrepreneurs in the Province of Bataan, Philippines

“…Among the government incentives provided in the Philippines were the tax exemption. Authors from various countries posits that during the pandemic, tax incentives provide a positive contribution to sustainability (Orkaido and Beriso, 2021;Ernie & Marcelino, 2021). In relation to this, Twesige D. and Gasheja F (2019) as well as Feyitimi O. et al (2016) and Babatayo (2021), proved that tax incentives have a positive significant impact of business growth, hence achieving the targeted goals and objectives of the government in creating policies and intervention.…”

The Impact of Tax Incentives on MSMEs Survivability During Covid-19 Pandemic: Case Study in Semarang City

“…This is because the wheels of the national economy are slowing down and suppressing taxpayers' efforts, so the use of these incentives by MSMEs needs to be investigated. Previous research conducted by Orkaido and Beriso [17] study the effect of tax incentives practices on the sustainability of SME Enterprises in Ethiopia during the pandemic. The result shows that tax holidays, tax allowance, reduction in the tax rate, accelerated depreciation, loss carry forward and tax exemption have positive and statistically significant effects on the sustainability of the MSMEs.…”