Abstract
Purpose: The purpose of this study was to determine the effect of VAT 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, VAT incentives had a positive and significant relationship with performance of EPZ firms measured using ROA. The results further revealed that at 5% significance level, VAT incentives were found to have positive and significant relationship with performance of EPZ firms measured using the number of total jobs created in Kenya. The results also revealed that at 5% significance level, VAT 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, it was recommended that the government should reconsider its VAT policy by encouraging more VAT rebates to firms in order to boost their productivity and increase the volume of exports. The study also recommends that the government should introduce a strong monitoring unit to oversee the administration of tax incentives. Government should equally pay attention to the issue of security and infrastructure which are basic in order to maximize the benefits of tax incentives.
Highlights
1.1 Background of the StudyGovernments through capital allowances attempt to influence physical and financial capital
The results further revealed that at 5% significance level, valueadded tax (VAT) incentives were found to have positive and significant relationship with performance of EPZ firms measured using the number of total jobs created in Kenya
The results revealed that at 5% significance level, VAT incentives were found to have positive and significant relationship with performance of EPZ firms measured using the number of years in operation
Summary
1.1 Background of the StudyGovernments through capital allowances attempt to influence physical and financial capital. The Income Tax Act provides for various tax incentives through capital deductions. The government has allowed a claim of 150% for companies who invest outside the 3 cities of Nairobi, Mombasa and Kisumu and incur expenditures of more than 200 million. It has further been proposed in the Amendments to the Income Tax Act in the 2015/16 Budget statement 100% for ships from the initial allowance of 40% and capital deduction for buildings used for educational and training services to be increased from 50% to 100%. For other countries like Tanzania, tax incentives ranges from incentives on agricultural investors in the form of deferment of VAT payments on project capital goods as well as zero rated value added tax on agricultural exports (Network-Africa& Action Aid International, 2012)
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