Effects of Tax Incentives in The Development of Manufacturing Industries in Nairobi, Kenya
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Date
2018
Authors
Wangu, Munene Rosemary
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Publisher
KESRA/JKUAT - Unpublished research project
Abstract
This paper investigated the effects of fiscal incentives such as corporate tax incentives, capital allowance incentives, and VAT incentives on the development of the manufacturing industries in Nairobi. The study used Return on Assets (ROA) as the proxy for development. The researcher was motivated by the fact that many developing nations, like Kenya, often use fiscal incentives to attract foreign direct investment (FDI) through export processing zones (EPZ). The companies that invest in this zones often receive unique treatment and incentives for a given period of time. However, several researchers have investigated the effects of the incentives on the EPZs but not on the general manufacturing environment. Therefore, this research sort to understand if the fiscal incentives on the manufacturing sector without focusing on a specific are of production of zone. The study employed a descriptive survey research design. For data collection, the researcher employed random sampling to gather a sample of 51 respondents from an initial target sample of 80 respondents. The study used a questionnaire as the main data collection instrument. The data collected was analyzed using descriptive statistics and was regressed to give a statistical meaning to the results. The final regression equation was, ROA = 22,892,923 + 4.952 (corporate income tax incentive) + 9.344 (Capital allowance incentive) + 0.254(VAT Incentive). This showed that the various fiscal incentives all have a positive and significant effect on the development of manufacturing industries in Nairobi. The study concluded that even though these incentives are effective in stimulating development, they require other policies in order to maximize their effects on the manufacturing sector. The researcher recommended that the government should implement other policies that improve the business environment for the manufacturing sector. The government should focus on the local manufacturers and the reduction in the cost of doing business in order to maximize the effectiveness of the fiscal incentives in the economy as a whole.
Keywords: Return on assets, corporate tax incentives, capital allowance incentives, VAT incentives, and export processing zones.
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Keywords
Return on assets, Corporate tax incentives, VAT incentives, Export processing zones