Effect of Multiple Taxation on Financial Performance of Manufacturing Firms Listed at the Nairobi Securities Exchange
Abstract
The manufacturing industry has been worst affected by numerous taxation measures
implemented by the government. These taxes and levies include; corporate tax, VAT,
excise duty, custom duty, fire license, occupancy and safety permit, public health
license, signage/branding license, among other taxes and fees. These taxes and levies
have made it complex to operate a manufacturing business in Kenya. They have
increased the cost of doing business and many investors have looked for alternative
destination for their investments. In the same respect, other investors have closed their
manufacturing operations in Kenya for alternative markets leading to loss of jobs,
foreign direct investment, market rating and tax revenues. This research sought to bring
out the effect of multiple taxation on financial performance among listed manufacturing
firms at the NSE. The research established the effect of corporate tax, excise duty and
custom duty on financial performance among listed manufacturing firms. Firm size,
liquidity and leverage were used as the control variables in the model. Descriptive
research design was used. The 9 listed manufacturing firms were the target population.
Research variables data were derived from audited company's annual financial
statements from 2016 to 2020. Regression and correlation analysis were used to test the
study hypotheses by establishing the correlation between multiple taxation and
performance. The results indicated R2 of 0.481 which implied that the selected
independent variables contributed 48.1% to variations in performance. The study also
found that corporate tax (β=0.210, p=0.000); and Firm size has a significant positive
effect on performance (β=0.422, p=0.000) while leverage (β=-0.156, p=0.009) had a
negative and significant relationship with financial performance among listed
manufacturing firms. Excise duty, custom duty, and liquidity were not statistically
significant. The study recommends that the corporate tax being levied on listed
manufacturing firms should remain in place as it does not adversely affect performance
of manufacturing firms. Manufacturing firms listed at the NSE should diligently pay
the corporate taxes due as this will enhance their performance.
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