Abstract
This paper attempts to analyse the effects of tax incentives on the performance of Ugandan manufacturing firms in terms of gross sales and value added employing panel data estimation techniques. The study findings show that firms with tax incentives perform better in terms of gross sales and value added than their counterparts. The education level of managers of firms, firm-size, and age of the firm have positive impact on firm performance. The major policy implication of the study findings indicates that Government needs to streamline the provision of tax incentives for better firm performance. Access to quality and technical education and skills development is necessary in order to have qualified managers with high level of management skills to utilize the available tax incentives so as to improve firm performance.
Highlights
The 2001 Organization for Economic Co-operation and Development (OECD) Tax policy study defines tax incentives as: “provision in the tax code or other codes that offer a preferential tax treatment to certain activities over time, for example manufacturing versus non-manufacturing industries, some organizational forms of business over others”. Easson and Zolit (2003) define tax incentives as: “those special exclusions, exemptions, or deductions that provide special credits, preferential tax rates or deferral of tax liability”
The study findings show that firms with tax incentives perform better in terms of gross sales and value added than their counterparts
The objective of the study was to examine the effects of tax incentives on performance of Ugandan manufacturing firms using panel data techniques for the period 2000-2002
Summary
The 2001 Organization for Economic Co-operation and Development (OECD) Tax policy study defines tax incentives as: “provision in the tax code or other codes that offer a preferential tax treatment to certain activities over time, for example manufacturing versus non-manufacturing industries, some organizational forms of business over others (i.e. incorporated versus unincorporated)”. Easson and Zolit (2003) define tax incentives as: “those special exclusions, exemptions, or deductions that provide special credits, preferential tax rates or deferral of tax liability”. Easson and Zolit (2003) define tax incentives as: “those special exclusions, exemptions, or deductions that provide special credits, preferential tax rates or deferral of tax liability”. They argue that tax incentives can take the form of tax holidays for a limited duration, current deductibility for certain types of expenditures, or reduced import tariffs or customs duties. The major reforms undertaken since 1987 involved the creation of Uganda Revenue Authority in a bid to improve tax administration (URA Statute No 6 1991). Tax incentives were introduced to compensate firms that undertook major investment projects for the prevailing market distortions (Reinika & Chen, 1999)
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