TAX INCENTIVES AND INVESTMENT PERFORMANCE

ABSTRACT

Tax incentives are widely regarded as a strategic policy tool for stimulating investment and fostering economic growth. This study examines the effects of tax incentives on investment performance, focusing on small and medium enterprises (SMEs) in Benin City, Edo State, Nigeria. Using a survey research design, data were collected from 100 SMEs through a structured questionnaire. The responses were analyzed using regression analysis in SPSS to assess the relationship between tax incentives and investment performance. The study investigates the impact of four key tax incentives: corporate income tax relief, capital allowances, tax holidays, and investment tax credits. The findings reveal that corporate income tax relief, capital allowances, and investment tax credits have a significant positive impact on investment performance. Corporate income tax relief enables businesses to reinvest saved tax funds into productive ventures, while capital allowances lower the effective cost of acquiring capital assets, encouraging long-term investment. Investment tax credits exhibit the strongest influence on investment performance, indicating their effectiveness in stimulating reinvestment and enhancing firm competitiveness. Conversely, tax holidays show no statistically significant impact on investment performance, suggesting that their temporary nature and potential misuse may limit their effectiveness as an incentive. These results underscore the importance of well-structured tax policies in enhancing investment performance. Policymakers should prioritize corporate income tax relief, capital allowances, and investment tax credits while reconsidering the structure and implementation of tax holidays. The study contributes to existing literature by providing empirical evidence on the role of tax incentives in fostering economic growth within the Nigerian SME sector. Future research could explore sector-specific impacts and assess the long-term sustainability of tax incentive programs.