Scribd
Upload
45 views

Synopsis Presentation1 - Edited

This document outlines a study on the effect of tax incentives on the growth of micro, small, and medium enterprises (MSMEs) in Ethiopia during the COVID-19 outbreak. It introduces the topic, provides background on the importance of MSMEs and the impact of the pandemic. The study aims to examine how tax incentives like tax holidays, tax allowances, reduced tax rates, accelerated depreciation, and loss carry forwards have affected MSME growth. It presents hypotheses that these tax incentives have had positive and significant impacts. The findings could help policymakers design effective tax policies and support MSME survival and contributions during the pandemic.

Uploaded by

Kanbiro Orkaido
Copyright
© © All Rights Reserved
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
45 views

Synopsis Presentation1 - Edited

This document outlines a study on the effect of tax incentives on the growth of micro, small, and medium enterprises (MSMEs) in Ethiopia during the COVID-19 outbreak. It introduces the topic, provides background on the importance of MSMEs and the impact of the pandemic. The study aims to examine how tax incentives like tax holidays, tax allowances, reduced tax rates, accelerated depreciation, and loss carry forwards have affected MSME growth. It presents hypotheses that these tax incentives have had positive and significant impacts. The findings could help policymakers design effective tax policies and support MSME survival and contributions during the pandemic.

Uploaded by

Kanbiro Orkaido
Copyright
© © All Rights Reserved
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
You are on page 1/ 21

Bule Hora University

College of Business & Economics


Department of Accounting and Finance
PhD in Accounting and Finance program

The Effect of Tax Incentives on the Growth of Micro, Small and Medium Enterprises
(MSMEs) During Outbreak of Corona Virus: Case Study Ethiopia

The synopsis study area submitted to Bule Hora University as one criteria for PhD in
Accounting and Finance

By
Kanbiro Orkaido Deyganto

October, 2020
Bule Hora, Ethiopia
Contents of presentation

 Introduction

Methodology
Introduction

Micro, Small and Medium -Sized Enterprise (MSMEs) are play an


important role as a source of employment, innovation, competition,
economic growth, and which stimulate the entrepreneurial skill.
Micro, Small and Medium Sized Enterprises are representing more
than 70% of global employment and 50% of GDP.

 According to ILO (2020), MSMEs are being hit hardest by the fall-
out of the corona virus pandemic. So, MSMEs live matter more than
ever since they are considered as an engine for world economy.

Also, Study by Dugasa (2020) indicate that MSMEs experience


supply chain distortions due to irregular supply of raw materials and
intermediate goods, revenue loss, shortage of liquidity and reduction
in production contracts due to corona virus outbreak.
Introduction…………………….

Therefore, solutions are needed to give them the support they need in
the form of tax incentives to survive and continue to contribute to the
global economy.
Tax incentives are the government measure in place intended to
encourage MSMEs enterprises by deduction, exclusion, exemption
from a tax liability for a certain period to sustain survival and growth
(Kinyua. B.M. and Wanjala. K. 2020).
Keeping the above view in mind, properly and well-designed tax
incentive is crucial for development of micro, small and medium sized
enterprises for purpose of job creation, poverty reduction and GDP
growth for global economy especially during outbreak of corona virus.
 
There are several theories support the study of taxation as a discipline,
only few can be directly traced to tax incentives practices. These are:
Laffer curve theory; Classical theory, Neo-classical theory; and New
Growth (endogenous) theory. But, Laffer curve theory is the most
appropriate to this study which argue that it is possible to generate
higher revenues by granting tax incentives for MSMEs.
Introduction…………………….

 
Tax incentives offered for (MSMEs) are different from country to
country due to different in tax polices across countries in the world.
In developed countries like Germany, Hong Kong, China, Singapore,
Republic of Korea Iceland, US, Italy, Japan and New Zealand
dedicated more than 50 percent of their entire public support
programmers was provided to promote the growth small and
medium sized enterprises (ESCAP, 2018).
In Africa researchers such as Twesige and Gasheja (2019); Atawodi
& Ojeka (2012); Mungaya et al (2012); Siyanbola et al., (2017);
Wangeci and Kaplelach (2018); Ocheni, S.I and Gemade, T. I (2015);
studied the topic before outbreak of corona virus and concluded
that friendly tax incentive policy is instrumental to the survival and
growth of these micro, small and medium enterprises. But still there
gap of tax incentive policy development and implementation in
most countries in sub-Saharan Africa since they do not possess clear
comparative advantages over their neighbors.
Introduction…………………….

 When it comes to Ethiopia, major positive changes regarding


improving the growth of MSMEs have been introduced through
new recently revised Investment Proclamation 1186/2020.
 But, the contribution of tax incentives to the growth of MSMEs
was not clearly identified due to fact that tax incentives policies in
the country do not take in to account local institutions, groups of
industries and inter-firm linkages to create and strengthen the
bonds which can underpin global competitiveness during outbreak
of COVID-19 (EIC, 2020).
 Therefore, it is very important to study the topic “the effect of tax
incentive on the growth of micro, small and medium sized
enterprises during outbreak of corona virus in Ethiopia so as to
provide the policy guide that enables to improve tax incentive
practices in the nation.
Statement of The Problem

 After the first infections in china at the end of 2019,


the corona virus disease has continued to spread
across the world and declared as a pandemic by the
World Health Organization (WHO) on May, 2020.
The COVID-19 has become a global emergency, so
the MSMEs in the world are experiencing the closure
of each business activities of and stay at home
principle by quitting different trading directions that
can significantly affect the world economy.
Statement of The Problem

 According to OECD (2020), there are several ways the coronavirus


pandemic affects the economy, especially MSMEs in the world, on both
the supply and demand sides.
On the supply side, companies experience a reduction in the supply of labor,
as workers are unwell or need to look after children or other
dependents while schools are closed and movements of people are
restricted. Measures to contain the disease by lockdowns and quarantines
lead to further and more severe drops in capacity utilization. Furthermore,
supply chains are interrupted leading to shortages of parts and intermediate
goods.
On the demand side, a dramatic and sudden loss of demand and revenue for
SMEs severely affects their ability to function, and/or causes severe liquidity
shortages. Furthermore, consumers experience loss of income, fear of
contagion and heightened uncertainty, which in turn reduces spending and
consumption. These effects are compounded because workers are laid off
and firms are not able to pay salaries. Some sectors, such as tourism and
transportation, are particularly affected, also contributing to reduced
business and consumer confidence. More generally, SMEs are likely to be
more vulnerable to ‘social distancing’ than other companies.
Statement of The Problem

Then, almost all, African countries including Ethiopia have


taken bold quarantine and lockdown measures to control the
spread of corona virus which leads to collapse of health
system, education, business activities of MSMEs in particular
(Dugasa, 2020).
According study by Kenenisa L. et al,. (2020) the spread of
the corona virus has adversely affected both the supply and
demand side of MSME’s operation in Ethiopia due to
specific consequences include lack of raw material supply,
shortage of workers, shortage of working capital, increase
in operational cost, and consumers consumption declined.
As a result, MSME’s contribution to national GDP, creation
of employment opportunity, and other benefits are was
hampered.
Statement of ……………………

To survive, micro, small and medium scale enterprises have to shift
their operation system in line with nations need for fighting against
COVID-19. MSMEs have to divert their resources towards
producing products that could help the public to minimize the
transmission of the pandemic such as producing local soaps for hand
wash and masks. To these end the government of Ethiopia provided
tax incentives for MSMEs in the form tax holiday, tax allowance,
and accelerated depreciation, reduction in tax rate, and loss carry
forward in order to sustain their survival and growth.

This why the topic effect of tax incentives on the growth of MSMEs
in Ethiopia during the outbreak of corona virus is very important
issue of research that attracted the interest of researchers across the
world.
Research objectives
The study has both general and specific objectives. The general
objective of this study is to examine the effect of tax incentives on
the growth of Micro, Small and medium sized Enterprises in Ethiopia
during outbreak of corona virus pandemic.
Specifically, the study will address the following specific objectives:
 To identify the effect of tax holiday on growth of MSMEs
 To investigate the impact of tax allowance on growth of MSMEs
 To examine the effect decrease in tax rate has on growth of
MSMEs
 To identify the impact of accelerated depreciation on growth of
MSMEs
 To investigate the effect of loss, carry forward on growth of SMEs
 To assess the challenges related to tax incentives during outbreak
of corona virus.
Research Hypotheses
After critically reviewing the theoretical and empirical studies, the
researcher has developed the following hypotheses:
H1: Tax holiday has positive and statistically significant effect on the
growth of MSME in Ethiopia
H2: Tax Allowance has positive and statistically significant effect on the
growth of MSMEs
H3: Decrease in tax rate has positive and statistically significant effect on
the growth of MSMEs
H4: Accelerated depreciation has positive and statistically significant effect
on growth of MSMEs
H5: Loss carry forward has positive and statistically significant effect on
growth of MSMEs
Significance of the study
 It will 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 growth of investment in general. Additionally, the
study will have the following significances:

 It will provide valuable information for the regulatory body on the status of tax
incentive policies and their implication during outbreak corona virus.

 of It will be used by all regions in Ethiopia in enhancing the role of tax incentives
in growth of micro, small and medium sized enterprise.

 It will also serve as a reference material for anyone who will undertake a further
study on the same or related topic in national and international level.

 It will used as a fulfilment to get a PhD in Accounting and Finance from Bule
Hora University.
Scope of the Study
 The current study will geographically focuses on Ethiopia.
 Sector, micro, small and medium sized enterprises
 Subject wise was focused on the effect of the tax incentives:(tax
holiday, tax allowance, and accelerated depreciation, reduction in
tax rate, and loss carry forward) and on the growth of MSMEs.
 To address the objectives of the study, the study used primary data
which is limited to a year of 2020/2021.
Methodology of the study
Description of study area:
The effect of tax incentives on the growth of micro, small and
medium enterprises (MSMEs) in Ethiopian so as to provide the
policy direction that survival and growth of MSMEs will improved
through well designed tax incentive practice in Ethiopia in
response to corona virus outbreak.
Research Design: The researcher will use explanatory research
design because, the objectives of the study is to identify the effects
of tax incentives on the growth of MSMEs: Evidence from
Ethiopia.
Research Approach: The research approach that will be employed
in this study is mixed research approach that constitutes both
qualitative and quantitative research approach.
Data source and type: In this study, both primary and secondary
data types and sources were used to the objective of study.
Table1: Target population, Sampling Method and Sample size

Target Sampling Sample Size Sample Size


Population technique Determination
Formulas

2,490,645 Micro, Simple random MSMEs


Small and sampling (Yamane,1967) operating in
Medium Sized technique and   &
Enterprises stratified (Israel, 1992)
(MSMEs) in sampling
Ethiopia technique
Table 2: Stratified Sampling Size Determination

S.N Name of Number of MSMEs Formula Sample


branches in each study area size
1 Addis Ababa 122,752 (122,752/) *400 18

2 Dire Dawa 102,152 (102,152/) *400 16

3 Afar 9, 322 (9, 322/) *400 2

4 Amhara 505, 341 (505, 341/) *400 69

5 Benishangul-Gumuz 100, 322 (102,152/)*400 15

6 Gambela 343, 456 (343, 456/) *400 55

7 Harari 305, 348 (305, 348/) *400 49

8 Oromia 575, 051 (805, 344/) *400 92

9 Somali 135, 016 (135, 016/) *400 22

10 SNNPRs 185, 018 (185, 018/) *400 29

11 Tigray 125, 903 (102,152/) *400 20

12 Sidama 85, 014 (102,152/) *400 13

Total (/)*400 400


Tools of collection and Analysis
Methods and procedure of data collection:
 In this study, the primary data will be collected through
structured and unstructured questionnaire from MSMEs
owners in Ethiopia by trained enumerator with
supervision of the researcher.
Methods of data analysis:
The data analysis of the study will be conducted using
both descriptive and inferential statistics through
software package for social science version 21.0 in order
to obtain reliable finding that enabled the researcher to
make possible conclusion and suggestions about effect of
tax incentives on growth of MSMEs.
Empirical Model Specification

Since the dependent variable of the study growth


micro, have dichotomous outcomes (being-growth
and non-growth), the binary logistic regression
model was employed to find the effects of tax
incentives on the growth of SMEs.
Variables of the study
Any Questions & Comments ?

You might also like