Effects of Turn Over Tax on Financial Performance of Small and Medium Enterprises in Central Business District, Nairobi County
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Date
2015Author
Kinyua, Caroline W
Type
ThesisLanguage
enMetadata
Show full item recordAbstract
Tax payment is a civic duty and an imposed contribution by the government to
contribute to her principle source of revenue to provide public goods and services to
its citizenry. It is a compulsory unrequited payment to the Government. In an effort to
maximize collection of revenue, the Government introduced Turn Over Tax through
the finance Act of 2007 aimed at bringing more SMEs to the tax bracket. The Purpose
of the study was therefore an attempt to establish the effect of Turn Over Tax on the
financial performance of Small and Medium Enterpises in Nairobi CBD. The study
employed descriptive research design. A stratified sampling was used to collect
primary data from a sample size of 56 SMEs in Nairobi CBD. The study applied
regression and correlation statistical models to analyse the data. The results were
presented in tables. The findings indicated that the model had accounted for 88.6% of
the total variance in financial performance (ROA) of the SMEs. From the findings
11.4% of Nairobi CBD SMEs financial performance was accounted for by other
factors (variables ) that were not tested in the study s model. Findings also indicated
that there was sufficient evidence that the model was useful in explaining the financial
performance (ROA) of SMEs in Nairobi CBD; as it was significant at the 95%
confidence level (p = 0.000). The study revealed that there is a significant negative
relation between Turn Over Tax and financial performance. On the other hand, firms
Size, Liquidity, Age and Growth show a significant positive relationship with
financial performance. The study recommended that businesses should employ the
services of tax experts to aid them in tax planning in order to reduce the net tax
payment so as to increase their financial performance. Again they should increase
their asset size and ensure efficient use of those assets to reflect in the turnover of the
businesses. KRA should enhace capacity of SMEs by reducing tax rates and penalty
rates among other incentives aimed at assisting their business to flourish and in turn,
drive economic growth.
Publisher
University of Nairobi