Effect of tax incentives on performance of manufacturing firms in Kenya
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Date
01-10-18
Authors
Musau, Gilbert Kyalo
Journal Title
Journal ISSN
Volume Title
Publisher
KESRA/JKUAT - Unpublished research project
Abstract
Tax incentive is a global phenomenon for governments for attracting more investments by companies operating in different economic sectors. The main objective of this study was to examine the effect of tax incentives on performance of manufacturing firms in Kenya, taking Nairobi County as a case study. The study was guided by the following specific objectives: to identify how investment deductions affect performance of manufacturing companies in Nairobi County, to examine the impact of wear and tear allowance on performance of manufacturing companies in Nairobi County, to investigate the influence of industrial building deductions on performance of manufacturing companies in Nairobi County, to examine the effect of tax exemptions and remissions on performance of manufacturing companies in Nairobi County, and to establish how tax holidays influence performance of manufacturing companies in Nairobi County. The study adopted New Growth Theory, Tax Discrimination Theory, and Theory of Investment Behaviour. Employing descriptive research design, the study’s target population was manufacturing companies in Nairobi County. There are approximately 343 manufacturing companies in the county spreading across different sectors (KAM). This study focused on three domains namely consumer goods, industrial goods, and healthcare goods companies. A sample of 137 respondents comprising of top managers, mid-level managers and junior managers was used in the study. Stratified and simple random sampling techniques were used to pick participants. Through a structured questionnaire, the study mainly used quantitative data collected through both face-to-face and self-administered interviews. Quantitative data was analyzed using Statistical Package for Social Sciences (SPSS) and Excel Worksheets. Qualitative data was organized using NVivo software and a thematic critical discourse and content analysis was done. Data was then presented through frequency tables and graphs as well as through narrative reports. The study adhered to ethical considerations, observing the principles of confidentiality and beneficence. The study established that tax incentives had a significant effect on company performance. However, it also emerged that not all manufacturing companies were aware of tax incentives and their effect on company performance. Besides, not all tax incentives had similar impact on company performance. It is anticipated that the study findings will help the government and tax agencies to address taxation in companies dealing in all sectors. The findings will also add to the existing literature in the area of tax incentives and company performance.
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Keywords
Tax incentive, Nairobi County