Abstract
Purpose: the purpose of this study was to determine the effect of custom duty Incentive on the performance of EPZ firms in Kenya.Methodology: This research used correlation research design. Sample size of all the 86 registered EPZs firms was used in this study. Primary data was obtained using questionnaires. Secondary data from the registered firms was collected on; ROA, number and value of jobs and the length of stay of the firms. The study used both descriptive and inferential statistics to conduct data analysis.Results: The results of study revealed that at 5% significance level, custom duty incentives had a significant relationship with performance of EPZ firms measured using ROA. The results further revealed that at 5% significance level, custom duty incentives were found to have a significant relationship with performance of EPZ firms measured using the total number of workers in Kenya. The results also revealed that at 5% significance level, custom duty incentives were found to have positive and significant relationship with performance of EPZ firms measured using the number of years in operationUnique contribution to theory, practice and policy: Based on the study findings, the study recommended that the government should offer increased excise duty incentives in order to cut down on imports and in that way promoting the growth of demand for domestic products in the country. The government could pursue this strategy in order to curb smuggling and also to promote the growth of the tourism industry. The study further recommends that policy makers should adopt strategic incentive plans or targeted incentive scheme that targets specific industry or a strategic tax incentive that add value or contribute positively to the economy and are in line with the country’s vision 2030.
Highlights
1.1 Background of the StudyTo attract multinational companies, the world in the recent years is characterized by extreme competition between governments and because of this, tax incentives are a global issue
Practice and policy: Based on the study findings, the study recommended that the government should offer increased excise duty incentives in order to cut down on imports and in that way promoting the growth of demand for domestic products in the country
Majority of governments in the world use trade programs or policies to enhance modern exchange of goods and services across borders, to do so they set up industrial estates by fencing such an area to facilitate the manufacture of goods meant for export by specialized firms; that fenced region set aside by governments is referred to Export Processing Zone (EPZ) (World Bank, 1992).Other such instruments incorporate import tax drawback game plans, brief admissions and export subsidies
Summary
The world in the recent years is characterized by extreme competition between governments and because of this, tax incentives are a global issue. There has been an increase in the trend, as evidenced by expansion of companies such as Toyota to Northern France as well as Mercedes-Benz to the Alabana state in the USA. There are questions on whether governments have overstepped in these offers of incentives. This has in the long run raised debate after debate on the suitability of tax incentives (Harris, 1993). Aggarwal (2005) argues that an incentive strategy such as trade advancement plays a critical role in financial development but of late, strategies such as fare preparing zones (EPZs) as well as organized commerce zones (FTZs) have gained grounds
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