Tax Incentives and Financial Performance of Manufacturing Firms in Nairobi City County Kenya

This research examined the impact of tax incentives on the financial performance of manufacturing firms in Nairobi City County, Kenya. Specifically, the study sought to assess the effects of corporation tax incentives, double taxation treaty incentives, customs duty incentives, and value-added tax incentives on these firms' financial performance. The study population comprised 499 manufacturing firms in Nairobi City County, Kenya. From this population, 998 respondents, consisting of chief finance officers and accountants, were purposively selected. Using the Yamane formula, a sample size of 285 respondents was determined. The research employed a descriptive research design, utilizing questionnaires for primary data collection and annual audited reports and financial statements for secondary data covering the period from 2018 to 2022. Data analysis was conducted using SPSS software, and the results were presented through tables. Findings revealed that VAT incentives, corporate income tax incentives, customs duty incentives, and double taxation treaty incentives independently exhibited a significant relationship with the financial performance of manufacturing firms. The positive relationships observed suggested that manufacturing firms should leverage the tax incentives provided by the government. Additionally, the study recommended that the government reevaluate its VAT policy and enhance the incentives offered to manufacturing enterprises to further improve their financial performance. The study suggested that those involved in tax administration should think about how corporate income tax incentives might benefit the manufacturing industry. In order to gain the respect of the manufacturing sector's stakeholders, the research suggested that the government reconsider the tax laws pertaining to custom duties. The study suggested that the value addition of incentives from double taxation treaties to the performance of manufacturing enterprises should be taken into account by those involved in tax administration concerns. Key Words: Taxation, Manufacturing Industry, Incentives, VAT, Value Additions, Customs Duty CITATION: Karimi, J. W., & Wanjohi, F. M. (2024). Tax incentives and financial performance of manufacturing firms in Nairobi City County Kenya. The Strategic Journal of Business & Change Management, 11 (2), 253 – 278. http://dx.doi.org/10.61426/sjbcm.v11i2.2907