www.ijcrt.org © 2020 IJCRT | Volume 8, Issue 9 September 2020 | ISSN: 2320-2882 IJCRT2009526 International Journal of Creative Research Thoughts (IJCRT) www.ijcrt.org 4088 TAX INCENTIVES AND GROWTH OF INFORMAL SECTOR SMALL AND MEDIUM ENTERPRISES IN SOUTH WEST, NIGERIA. Folajimi Festus ADEGBIE Kolawole Olayemi BABATAYO Trimisu Tunji SIYANBOLA Babcock University, Department of Accounting, Ilishan-Remo,Ogun State. Abstract The informal sector Small and Medium Enterprises (SMEs) growth is very important to the development and expansion of an economy. Studies have revealed that SMEs in the informal sector are liquidated at infant stage and also not captured in the tax net. The study examined the impact of tax incentives on the growth of SMEs in the informal sector of South West, Nigeria. The study used survey research design. The population consisted of 2,708 registered SMEs with Small and Medium Enterprises Development Agency SMEDA. Using stratified and proportionate quota sampling method to administered questionnaire to 386 selected samples. The study administered 772 copies of the questionnaire with a retrieval rate of 88%.Reliability ranged between 0.70 and 0.87.Descriptive and inferential statistics were used to analyze the data.The results showed that tax incentives have significant impact on gross margin growth with Adj. R 2 =0.890;F-statistics of 455.530 and p-value of 0.000.Also tax incentives have significant impact on asset tangibility growth with Adj.R 2 of 0.781,F-Statistics =60.220 and p-value =0.000.The study concluded that tax incentives have the predictive power to grow the informal sector SMEs in Nigeria. The study recommended that Federal Inland Revenue Service and State Internal Revenue Board should introduce policies that enable the SMEs in the informal sector to be captured in the tax net through tax incentives. The will expand the tax revenue generation to both the federal and state governments of Nigeria Keywords: Economy, Economic development, Growth, Informal sector, Poverty, Small and Medium Enterprises, Tax incentives, 1Introduction: Informal sector in any economy of the world is that sector that contains many businesses which are not recognized or registered by the government of the nation. The informal sector consists of economies outside government operations and activities. The economic activities of the informal sector save many citizens from poverty and joblessness. Their activities are based on low level of cash operations or cash budget, and their profits or losses are determined on transactions basis, which makes it difficult to tax them. Also because they are not registered makes it difficult to recognize and record then into tax net of the nations.(Akeju,2018).