THE EFFECT OF CAPITAL ALLOWANCE INCENTIVE ON THE PERFORMANCE OF EPZ FIRMS IN KENYA

Abstract

This study intended to investigate the influence of the effect of capital allowance incentives on the performance of EPZ firms in Kenya. The study adopted a descriptive and explanatory research design. The study used a stratified sampling approach because the number of the EPZ firms in Kenya was categorized into 4 strata. The total numbers of firms used in the study were 86 registered EPZ firms in Kenya according to Export Processing Zones Authority (EPZA). The study adopted a census survey design. Census survey was adopted because the population of interest was small.  A 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 created and the length of stay of the firms. The secondary data was collected from operating EPZ firms in Kenya annual report. The study assessed the performance of EPZ firms against the tax incentives they benefited for the last ten years. The study used both descriptive and inferential statistics to conduct data analysis. Descriptive statistics included frequencies, percentages, mean and standard deviations while inferential statistics were correlations and regression analysis. The study findings revealed that at 5% significance level, capital allowance tax incentive had a positive and significant relationship with performance of EPZ firms measured using ROA, number of jobs created and length of stay. The study concluded that increase in capital allowance tax incentive resulted to increase in both ROA of the firms and  the number of jobs and length of stay. The study recommended that stakeholders in tax policy should reconsider the economic value of capital allowances.