The Effect of Tax Holidays on Manufacturing Sector Growth: Evidence from Ogun State Industrial Parks
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Background of the Study
Tax holidays are a fiscal policy tool used by governments to incentivize investment in specific sectors or regions by offering temporary exemptions from tax obligations. In Nigeria, tax holidays are employed to stimulate growth in the manufacturing sector, attract foreign direct investment, and create jobs (Oladipo & Fashola, 2024).
Ogun State Industrial Parks have benefited from tax holidays aimed at encouraging the establishment and expansion of manufacturing firms. These incentives are expected to lower operating costs, increase profitability, and drive sectoral growth. However, concerns have been raised about the long-term impact and equitable distribution of such incentives (Bello, 2023).
This study investigates the effect of tax holidays on the growth of the manufacturing sector in Ogun State Industrial Parks, analyzing their effectiveness and identifying areas for improvement.
Statement of the Problem
While tax holidays are intended to foster growth in the manufacturing sector, their impact has been mixed due to issues such as limited awareness, administrative inefficiencies, and inadequate monitoring. In Ogun State Industrial Parks, the effectiveness of tax holidays in achieving sustained growth remains unclear, necessitating an in-depth evaluation (Ibrahim et al., 2025).
This study explores the effect of tax holidays on manufacturing sector growth in Ogun State, providing insights into their strengths and weaknesses.
Objectives of the Study
1. To evaluate the impact of tax holidays on manufacturing sector growth in Ogun State Industrial Parks.
2. To identify challenges associated with the implementation of tax holidays.
3. To propose strategies for enhancing the effectiveness of tax holidays in promoting industrial growth.
Research Questions
1. How do tax holidays affect manufacturing sector growth in Ogun State Industrial Parks?
2. What challenges are associated with the implementation of tax holidays?
3. What strategies can enhance the effectiveness of tax holidays in promoting industrial growth?
Research Hypotheses
1. Tax holidays significantly contribute to manufacturing sector growth.
2. Implementation challenges limit the effectiveness of tax holidays in Ogun State.
3. Improved administration of tax holidays enhances industrial growth.
Scope and Limitations of the Study
The study focuses on the impact of tax holidays on manufacturing firms within Ogun State Industrial Parks, analyzing their implementation, effectiveness, and challenges. Limitations include variability in firm size and sectoral representation within the parks.
Definitions of Terms
• Tax Holidays: Temporary exemptions from tax obligations granted to businesses to encourage investment.
• Manufacturing Sector: Industries involved in the production of goods from raw materials.
• Industrial Parks: Designated areas developed to house manufacturing and industrial facilities
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