Effect of Tax Relief Policies on the Growth of Smes in Kwara State Nigeria

ABSTRACT The growing interest in fiscal policy interventions has heightened the focus on tax relief as a strategic tool for enhancing the performance of Small and Medium Enterprises (SMEs), particularly in developing economies like Nigeria. In Kwara State, SMEs continue to face financial, operational, and market-related challenges that hinder their growth and sustainability. Among the notable government interventions are tax holidays, tax credits, and tax deductions designed to stimulate SME development. However, the effectiveness of these tax relief policies in driving specific growth outcomes remains inadequately explored. This study investigates the effect of tax relief policies on the growth of SMEs in Kwara State. The problem lies in the insufficient empirical evidence on how tax holidays, tax credits, and tax deductions influence business expansion, employment growth, and market competitiveness. The specific objectives of the study were to: (i) examine the effect of tax holidays on business expansion of SMEs, (ii) determine the impact of tax credits on employment growth of SMEs, and (iii) evaluate the influence of tax deductions on market competitiveness of SMEs. A descriptive survey research design was employed. The population of the study comprised registered SMEs in Kwara State, and a sample of 312 respondents was selected using stratified random sampling. Data were analyzed using Partial Least Squares Structural Equation Modeling (PLS-SEM) through SmartPLS 4.0 software for both measurement and structural model analysis. The findings revealed that: i. Tax holidays has significant effect on business expansion (β = 0.487, t = 9.142, p < 0.05); ii. Tax credits has significant effect on employment growth (β = 0.514, t = 10.331, p < 0.05); and iii. Tax deductions has significant effect on market competitiveness (β = 0.622, t = 12.708, p < 0.05). These results demonstrate that each form of tax relief policy contributes meaningfully to distinct aspects of SME growth in the study area. The study concludes that tax relief policies, when effectively administered, are vital instruments for promoting the expansion, employment generation, and competitive strength of SMEs. It is recommended that tax authorities and policy-makers prioritize the simplification, awareness, and accessibility of tax relief programs to foster a more enabling environment for SME development in Kwara State.