The Influence of Taxation on Business Innovation: A Case Study of Lagos Entrepreneurs

Abstract

This study investigates how taxation influences business innovation among entrepreneurs in Lagos State, Nigeria. The purpose is to explore entrepreneurs' perceptions of tax policies and their impacts on innovation. The research is guided by four objectives: evaluating the impact of tax incentives on innovation capabilities, assessing awareness of tax policies, exploring the relationship between tax compliance and innovation, and investigating the influence of administrative practices in tax collection on innovation. A survey research design was employed, targeting a population of approximately 1.5 million registered small and medium enterprises (SMEs) in Lagos The questionnaires were administered directly, yielding 334 completed responses. Data analysis included descriptive statistics and F-tests to evaluate hypotheses. The study found a significant positive relationship between tax incentives and innovation capabilities, and a strong link between tax compliance and innovation levels. Awareness of tax policies was identified as a critical factor influencing innovation. The study recommends enhancing tax incentives, improving awareness and education about tax policies, promoting tax compliance, and streamlining administrative practices in tax collection to foster a more innovation-friendly environment for entrepreneurs in Lagos State.