Effect of tax incentives on financial performance of manufacturing industries in Nairobi County, Kenya.
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Date
2019
Authors
Bundi, Obed Mogesi
Journal Title
Journal ISSN
Volume Title
Publisher
KESRA/JKUAT - Unpublished research project
Abstract
The primary purpose of this research was to determine the effect of tax incentives on financial performance of manufacturing industries. Tax incentives are presumed to play a significant role in attracting producers in developing nations in particular. In advanced nations, the same has been empirically proven. However, study is in its infancy phase in developing nations. This research concentrated on the effect of investment allowance, reduction of tax rated and tax exemption incentives on financial performance of manufacturing industries. The study adopted a descriptive survey research design. The study targeted all the 566 manufacturing industries operating in the Nairobi County where 85 manufacturing firms were sampled. Primary data was collected using structured questionnaires and analysed through Statistical Package for Social Sciences version 24. Descriptive and inferential statistics were used for analysis. Descriptive statistics which described the population were mean, standard deviation and percentages while inferential statistics were correlations and regression analysis. A multivariate regression model was adopted to establish the effect of tax incentives on financial performance. The results of the study showed that capital allowance incentive has a positive and significant effect on financial performance of manufacturing firms in Nairobi County (B = 0.204; t = 2.425 < 1.96; P-Value = 0.019 < 0.05) ; tax rate incentive has a positive and significant effect on financial performance of manufacturing firms in Nairobi County (B = 0.491; t = 8.298 < 1.96; P-Value = 0.000 < 0.05) and tax exemption incentive has a positive and significant effect on financial performance of manufacturing firms in Nairobi County (B = 0.772; t = 9.290 < 1.96; P-Value = 0.000 < 0.05). The study findings led to the conclusion that capital allowance incentive is important in enhancing financial performance of manufacturing firms in Nairobi and that an increase in capital allowance incentives leads to a significant increase in financial performance of manufacturing firms in Kenya. The study also concludes that tax rates incentives are important in improving financial performance of manufacturing firms in Kenya and that an increase in tax rate incentives leads to a significant increase in financial performance of manufacturing firms in Kenya. The study also concludes that tax exemption incentives play a significant role in improving financial performance of manufacturing firms in Kenya and that an increase in tax exemption incentives leads to a significant increase in financial performance of manufacturing firms in Kenya.
Description
PROJ 338.973 BUN
Keywords
Financial Performance, Tax Incentive, Capital Allowance, Tax Exemption