JB Project FINAL-1

EFFECTS OF TAX INCENTIVES ON THE PERFORMANCE OF EXPORT
PROCESSING ZONE FIRMS IN KENYA; A CASE OF ATHI RIVER
PAUL JANE BETTY
A RESEARCH PROJECT SUBMITTED TO THE DEPARTMENT OF ECONOMICS,

ACCOUNTS AND FINANCE IN THE SCHOOL OF BUSINESS IN PARTIAL
FULFILLMENT OF THE REQUIREMENTS FOR THE AWARD OF POST
GRADUATE DIPLOMA IN CUSTOMS ADMINISTRATION OF THE JOMO
KENYATTA UNIVERSITY OF AGRICULTURE AND TECHNOLOGY
2019
DECLARATION
This project undertaking is my unique work and has not been introduced for an honor in some
other college
Signature………….…………………...................... DATE………………………………..
Paul Jane Betty
Reg. Number: HDB335-C016-1517/2017
This project has been submitted for examination with my approval as a university supervisor;
Signature………….…………………...................... DATE………………………………..
Bernard Matibe
Lecturer, KESRA
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DEDICATION
I dedicate this study to God almighty and my family who have seen me this far
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ACKNOWLEDGEMENT
It has been a great and challenging time studying at KESRA. I thank the KESRA
administration and staff for the peaceful process during my post graduate program. I’m
grateful to all my lectures for their tireless support and sacrifice especially to Mr. Timonah
Namutila for his support in writing of this research project. I wish to stretch out my
gratefulness to my supervisor Mr. Bernard Matibe for his expert direction and guidance all
through the entire procedure. To my kindred understudies, thank you for the help and
guidance you have given me both in school and keeping in mind that composition of this
project venture, I salute all of you. May God favor you.
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ABSTRACT
Greater part of government institutions over the globe use trade policies arrangements and
projects to improve trade within the borders. This has eventually prompted the presentation of
a few exchange related impetuses. Export Processing Zones were framed in Kenya in 1990
under the EPZ Act 1990, CAP 517 Laws of Kenya to demonstrate the open entryway for the
country's progression and fiscal advancement. This project expected to recognize the effect of
tax incentive on performance of Export Processing Zone firms in Kenya. Precisely, it
separated the various sorts of expense motivating forces offered to EPZ firms which really or
in an indirect manner impact execution of those organizations. Execution as the reliant
variable was estimated by employment creation, innovation move rate, and the remote trade
profit. This investigation received logical examination approach with Athi River EPZ since it
69 firms which are satisfactory for a logical research study. Essential information was
gathered utilizing surveys. This examination utilized board information and pooled board
relapse model in testing the centrality of the impact of the free factors on the needy variable.
Information were broke down by both unmistakable measurements and inferential insights.
From the assessment, 89% of the respondents saw that corporate individual evaluation
influences execution of EPZ Firms while 11% said it has no effects. 84%, of the respondents
said that holding charge inspiration impacts the display while 16% said it has no effect. 78%
of the respondents communicated that commitment exemption impacts execution of EPZ
firms while 22% said it has no effect. On capital settlement 89% of the respondents
communicated that it impacts the show while 11% said it doesn't impact the introduction of
EPZ Firms in Kenya. . The aftereffects of multivariate relapse model additionally uncovered
that corporate annual expense motivator had a positive and huge association with execution
of EPZ firms estimated utilizing the quantity of occupations. The aftereffects of bivariate
relapse models embraced uncovered that at 5% criticalness level corporate annual expense
motivating force, capital recompense charge impetus, obligation exception and retaining
charge just as a positive and huge association with execution of EPZ firms estimated utilizing
innovation, outside trade and the absolute number of occupations. The examination
discovered that Firm size moderate the connection between assessment motivating forces and
the presentation of EPZ firms in Kenya. The investigation led examination on the EPZ firms
to discover the survival pace of the EPZ following 7 years time of expense occasion. Inside
this multiyear time frame EPZ firms profit by expense motivating forces accessible. This
finding suggests that expense motivating forces might be significant in pulling in EPZ firms
yet the presentation of these organizations relies upon different components not quite the
same as duty impetuses. In perspective on the revelations the assessment construed that the
governing body should continue offering charge exemptions for it to pull in and keep up
outside budgetary pros in the country. This assessment recommends that accomplices in
obligation approach should reexamine the money related estimation of corporate cost
inspiring power. The possibility of the examination required a highlight on mystery
information related to the gathering firms. Exposure of such mystery information made the
respondents feel infringed and from this time forward they were ensured of grouping and
good treatment of the information they gave.
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TABLE OF CONTENTS
DECLARATION......................................................................................................................ii
DEDICATION........................................................................................................................ iii
ACKNOWLEDGEMENT ...................................................................................................... iv
ABSTRACT .............................................................................................................................. v
LIST OF TABLES ............................................................................................................... viii
LIST OF FIGURES ................................................................................................................ ix
ACRONYMS AND ABBREVIATIONS ................................................................................ x
DEFINITION OF TERMS..................................................................................................... xi
CHAPTER ONE ...................................................................................................................... 1
INTRODUCTION.................................................................................................................... 1
1.1 Background of the study .................................................................................................. 1
1.2 Statement of the Problem ................................................................................................. 4
1.3Objectives .......................................................................................................................... 5
1.4 Research Questions .......................................................................................................... 5
1.5 Justification ...................................................................................................................... 5
1.6 Scope of the Study............................................................................................................ 6
1.7 Limitations of the Study ................................................................................................... 6
CHAPTER TWO ..................................................................................................................... 7
LITERATURE REVIEW ....................................................................................................... 7
2.1 Introduction ...................................................................................................................... 7
2.2 Theoretical Literature Review .......................................................................................... 7
2.3 Conceptual Framework .................................................................................................. 10
2.4 Measurements of Performance ....................................................................................... 11
2.5 Empirical Literature Review .......................................................................................... 12
2.6 Critique of Existing Literature ....................................................................................... 14
2.7 Summary of Literature Reviewed .................................. Error! Bookmark not defined.
2.7 Research Gaps ................................................................................................................ 15
CHAPTER THREE ............................................................................................................... 17
RESEARCH METHODOLOGY ......................................................................................... 17
3.1 Introduction .................................................................................................................... 17
3.2 Research Design ............................................................................................................. 17
3.3 Target Population ........................................................................................................... 18
3.4 Data Collection Methods................................................................................................ 18
3.5 Sample and Sampling Frame.......................................................................................... 18
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3.6 Questionnaire Design ..................................................................................................... 19
3.7 Data Processing and Analysis ........................................................................................ 19
CHAPTER FOUR .................................................................................................................. 22
RESULTS AND DISCUSSION ............................................................................................ 22
4.1 Introduction .................................................................................................................... 22
4.2 Response Rate ................................................................................................................ 22
4.3 Demographics................................................................................................................. 22
4.4 Factors influencing Tax Incentives on the performance of EPZ firms. ..................Error!
Bookmark not defined.
4.5 Summary of Data Analysis ............................................................................................ 46
CHAPTER FIVE ................................................................................................................... 48
SUMMARY, CONCLUSION AND RECOMENDATIONS ............................................. 48
5.1 Introduction .................................................................................................................... 48
5.2 Summary of Findings ..................................................................................................... 48
5.3 Conclusions .................................................................... Error! Bookmark not defined.
5.4 Recommendations .......................................................................................................... 50
5.5 Suggestion for Further Research .................................................................................... 52
REFERENCES ....................................................................................................................... 53
Appendix I: Questionnaire .................................................................................................... 56
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LIST OF TABLES
Table 4. 1Response Rate ....................................................................................................................... 22

Table 4. 2 Level of Education ............................................................................................................... 22
Table 4. 3 Working Experience ............................................................................................................ 23
Table 4. 4 Level of Employment .......................................................................................................... 24
Table 4. 5 Effect of Corporate Income Tax on performance of EPZ Firms in Kenya. ......................... 25
Table 4. 6 Extent to which Corporate Income Tax affects performance of EPZ Firms in Kenya ........ 26
Table 4. 7 Descriptive Corporate Income Tax Incentive on EPZ firms performance........................... 28
Table 4. 8 Model Fitness ....................................................................................................................... 28
Table 4. 9 Effects of Corporate Income Incentive on Number of jobs ................................................. 29
Table 4. 10 Model Fitness .................................................................................................................... 29
Table 4. 11 Effects of corporate Income Incentive on technology ....................................................... 30
Table 4. 12 Model Fitness ..................................................................................................................... 30
Table 4. 13 Effects of Corporate Income Incentive on Foreign Exchange ........................................... 31
Table 4. 14 Effect of withholding Tax on performance of EPZ Firms in Kenya.................................. 31
Table 4. 15what is the effect of withholding Tax on performance of EPZ Firms in Kenya. ................ 32
Table 4. 16 Withholding tax Statement from Secondary Data ............................................................. 33
Table 4. 18 Effects of withholding tax Incentive on the Number of jobs ............................................. 34
Table 4. 20 Effects of withholding tax on technology .......................................................................... 35
Table 4. 21 Model Fitness ................................................................................................................... 35
Table 4. 22 Effects of withholding tax on foreign exchange ............................................................... 36
Table 4. 23 Effect of duty exemption on performance of EPZ Firms in Kenya. .................................. 36
Table 4. 24 Effect of duty exemption on performance of EPZ Firms in Kenya. .................................. 37
Table 4. 25 Description of Duty Exemption Statement from secondary Data ...................................... 38
Table 4. 27Effects of Duty Exemption on the Number of jobs ............................................................ 39
Table 4. 28 Model Fitness .................................................................................................................. 39
Table 4. 29 Effects of duty exemption on technology .......................................................................... 40
Table 4. 31 Effects of Duty Incentive on foreign exchange ................................................................. 41
Table 4. 32 Effect of capital allowance tax on performance of EPZ Firms in Kenya. ......................... 41
Table 4. 33 Effect of capital allowance tax on performance of EPZ Firms in Kenya. ......................... 42
Table 4. 34 Descriptive of Capital Allowance Tax Incentive for EPZ firms ........................................ 44
Table 4. 35Effects of Capital Allowance Incentive on the Number of jobs ......................................... 44
Table 4. 36 Effects of Capital Allowance Incentive on technology...................................................... 45
Table 4. 38 Effects of Capital Allowance Incentive on foreign exchange ............................................ 46
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LIST OF FIGURES
Figure 4. 1 Level of Education ................................................................................................ 23
Figure 4. 2 Working Experience. ............................................................................................. 24
Figure 4. 3 Level of Employment ............................................................................................ 25
Figure 4. 4 Effect of Corporate Income Tax on performance of EPZ Firms in Kenya. .......... 26
Figure 4. 5 Effects of Corporate Income Tax on performance of EPZ Firms in Kenya ...Error!
Figure 4. 6Effect of withholding Tax on performance of EPZ Firms in Kenya. ..................... 31
Figure 4. 7Effect of withholding Tax on performance of EPZ Firms in Kenya. ..................... 32
Figure 4. 8 Effect of duty exemption on performance of EPZ Firms in Kenya. ..................... 37
Figure 4. 9 Effect of duty exemption on performance of EPZ Firms in Kenya. ..................... 37
Figure 4. 10 Effect of capital allowance tax on performance of EPZ Firms in Kenya. ........... 42
Figure 4. 11 Effect of capital allowance tax on performance of EPZ Firms in Kenya. ....Error!
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ACRONYMS AND ABBREVIATIONS
EPZ Export Processing Zones
EPZA Export Processing Zones Authority
FDI Foreign Direct Investment
KNBS Kenya National Bureau of Statistics
KRA Kenya Revenue Authority
OECD Organization for Economic Co-operation and Development
SMEs Small and Medium-Sized Enterprises
CITI Corporate Income Tax Incentive
CAI Capital Allowance Incentive
IDE Import Duty Exemption
WTH Withholding Tax Holiday
UNCTAD United Nations Conference on Trade and Development
MENA Middle East and Northern Africa
OLS Ordinary Least Squares
FGLS Feasible Generalized Least Squares
ROI Returns on Investment
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DEFINITION OF TERMS
Capital allowances tax incentives: alludes to wholes of cash a business can deduct from
the general corporate or annual assessment on
its benefits.
Corporate income tax incentives: alludes to a decreased corporate personal duty rate on
qualifying pay to specific sorts of exercises.
Duty exemptions: alludes to exclusion or a decrease of a tax or expense on the

importation or exportation of merchandise. Business products not yet
cleared through traditions are held in a fortified store until they are
handled.
Withholding tax holiday incentive: refers to the exemptions or tariffs on the tax
deducted at source from payments like income
interest, dividends, pensions and other related
remittances.
Performance: alludes to the real yield or consequences of an

association as estimated against its planned
yields (objectives/targets).
Export Processing Zones: alludes to assigned parts that are planned for
advancing and encouraging fare arranged
activities and speculations to build up an
empowering domain for such venture.
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CHAPTER ONE
INTRODUCTION
1.1 Background of the study
Governments in both developed and developing nations stiffly compete to appeal to
investments globally. While nations from the western world give investment remittances, the
developing nations give tax holidays and accord duty exemptions. The advanced utilization
of tax assessment as a monetary instrument can be followed back to 1926, during the
financial downturn, which had struck pretty much every economy around the world. This
period was set apart by extraordinary decrease in the generally speaking monetary exercises
which came about to an abatement in the absolute income, deficiencies in financing for the
private investment and a decrease in the ways of life. In an offer to start recovery, restoration
and preparation of enough capital expected to cover for both monetary and social costs and to
raise the way of life of the individuals, financial approaches were defined and they were
comprehensive of tax collection (Azevedo, Pereira & Rodrigues, 2018).
Galindo (2011) characterizes tax collection as a necessary levy forced by the administering
experts through its organizations on the pay, utilization and the capital possessed by its kin.
Duty is forced on close to home salary like pay rates, benefits from business exercises, profits
and sovereignties. Through such reasonings, the administration utilizes them in the
arrangement of security, social comforts and the conditions important for the economy to
flourish. In any case, it was noticed by the author that the fundamental goal of tax assessment
is to raise the assets which the legislatures needs to meet its costs, deal with the economy and
help in the redistribution of wealth. To numerous administrations, tax collection has been a
critical instrument in accomplishing both monetary and financial targets. Laws and bills have
been passed, custom fitted to draw in venture, dispense with the impediments to exchange
and development of businesses.
Tresch (2014) said to upgrade the cutting edge trade of merchandise and enterprises over the
boarders within nations, huge numbers of the legislatures have thought of exchange projects
and strategies to control and encourage the activities. Modern bequests, regularly known as
Export Processing Zones (EPZs) which assembling merchandise implied for exports in
fenced locales set up by the legislature are a result of such exchange programs. To advance
the development of exports, EPZ has been a generally received wonder, and keeps on
creating generous effect in this way, improving financial exercises. To further improve these
financial exercises and prod speculations by the individual firms, governments have utilized
assessment motivating forces in areas which have recently been torpid or which have not
arrived at their maximum capacity. Until this point in time, the Kenyan government has
administered the usage of more than twenty monetary and tax impetuses, which looked to
illuminate the hindrances to development. Moreover, institutional changes have been
empowered by the applicable partners in the mission to accomplish monetary development.
The government of Kenya, in the endeavors to move away from the import-substitution
system to spur financial growth, has made splendid efforts in pursuing a growth strategy
which centered on exports. Through the introduction of the EPZ, exports have surged, in the
presence of tax incentives. An instance of the tax incentive is the wear and tear allowance
which is relative to the depreciation of assets. Another tax incentive for the EPZs is the
Investment Deductions Allowance (IDA) which is relative to the bills made on machinery.
Generally, incentives lower the charges that a firm incurs enhancing the revenues and the
earnings registered, and at the same time opening up opportunities which corporations can
exploit, hence marking an expanded universal performance (Just & Weber, 2012).
1.1.1 Tax Incentives

Tax incentives in this study can be contextualised as the independent variable which when
controlled, influences the result of independent variable. Tax allowance is characterized as
the money related arrangements which help attract interests in a nation. The United Nations
Conference on Trade and Development (UNCTAD) characterizes charge motivator as the
impetuses that lessen the weight of expense of any individual, association or business
substance to incite them to put resources into specific ventures or parts of a nation
(UNCTAD, 2004). The Kenya Revenue Authority (KRA) characterizes charge motivator as
the arrangement which awards any individual or business substance an ideal condition which
is unique in relation to the ordinary ta enactment appropriate.
Tax exemptions may take various structures based upon the nation which actualizes them. On
account of Kenya, the most widely recognized duty impetuses incorporate being absolved
from instalment of assessments for a specific timeframe after the start up. For instance,
organizations under EPZ which primarily send out merchandise are saddled at 0% rate in
capital annual assessment during their initial ten years of activity (EPZA Kenya, 2018).
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Remittances for speculations which are in respect to costs are additionally a type of a duty
motivator just as expense credits, diminished assessment rates on benefits, charge occasions
and diminished paces of tax assessment. Organizations remain to increase following such
motivating forces with making of occupations expanding yield which consequently improves
execution. Corporate personal expense impetus, capital remittances charge motivating forces,
and import obligation exceptions are a piece of the free factors in respect to this examination.
1.1.2 Performance
Performance according to this study is the dependent variable which changes following
control of the autonomous variable, tax impetuses. It is characterized as how much a firm
accomplishes its monetary targets. To assess how a firm performs monetarily, the use of its
resources for general deals must be evaluated, and is estimated in money related terms.
Mitchell, Obeidat and Bray (2013), noticed that gainfulness, development, and market worth
structure are the ideal premise of deciding the worth of a business for tax purposes.
Development mirrors the limit of an organization to work in size. Increment in the size of a
firm is legitimately identified with the all-out benefits and the incomes it creates while
gainfulness depicts the capacity that the firm needs to produce returns. An enormous firm
appreciates economies of scale and gains the capacity over other littler firms to control the
market. Furthermore, it places itself in a superior position to appreciate improved incomes
and benefits in the present moment as well as in the long haul. Market worth mirrors the
examination of a firm which is done remotely and is associated with the recorded exhibition
(Mitchell, Obeidat and Bray, 2013). Logically, esteem expansion, work creation, abilities
move and remote trade increases are joined to this examination.
1.1.3 The Relationship between Tax Incentives and Performance

Assessment impetuses given by the legislature give boundless advantages and points of
interest to the organizations in EPZ. The normal assessment motivating forces gave to these
organizations incorporate corporate personal expense impetus, capital remittances charge
motivators, and import obligation exclusions (Kuria, 2017). For example, capital remittances
are deducted from the corporate duty risk. Through this, organizations get the chance to
report relative benefits after expense. Essentially, the assessment motivating forces gave
helps firms in recuperating capital consumptions acquired during their tasks. Mayende (2013)
noticed this is of incredible essentialness particularly now and again when firms don't enroll
great execution. These motivating forces are additionally given that they may invigorate
business activities and ventures. They structured and executed by government organizations
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in an offer to restore and coordinate financial execution in divisions which could be failing to
meet expectations or torpid because of different components. It was additionally settled that
assessment impetuses help in the manifestations of business openings and persuading sole
owners to join as restricted risk. Such is critical to improve execution despite the fact that
benefit (a significant feature of deciding execution) probably won't be acknowledged for the
time being (Matkin, 2010).
1.2 Statement of the Problem

As importing goods from overseas continues to be a problem in many countries, a search for
alternatives which will effectively solve import problems goes on. The formation of EPZs
aimed to diversify and promote the exportation of goods as one of the initiatives created as a
solution to the existing import conundrums. In this era of globalization, many countries have
adopted the EPZs and therefore with increase in competition, the need to have a competitive
tax system which will aid in exploitation of potential is evident. Not only will it give it the
opportunity to maximize their potential, but also give them a trading advantage in the global
market. As the number of EPZ increase in the south of Sahara, there is much to be done with
respect to the performance of the EPZs. Notably, the number of employees that are hired
continues to go down, as the number of those laid off goes up. This reflects a significant
problem that EPZs across the African continent need to address, especially at the time when
the global trade and beneficial competition are on the rise (Jauch, 2002). Misuse of tax
incentives is evident as the EPZs don’t seem to achieve their main aim. There is expected
increase in employment opportunities but this is not the case (Jauch,2002). Total sales also
declined by 1.9% in 2017 according to EPZA (2017) as well as a exports decrease by 5.3%.
Uwaume and Ordu (2014) found in their examinations that expense impetuses majorly affect
Nigeria's modern development and monetary advancement. Chukwumerije and Akinyomi
(2011) led a review to investigate the impact of assessment motivating forces on little scale
industry general execution in Rivers State, Nigeria. They saw that there was an
overwhelmingly good connection between's assessment motivating forces and gainfulness,
development and advancement. Murage (2012) played out an examination investigating the
effect of duty motivations on interest in Kenya's fare preparing regions. His outcomes saw
that, as deals and incomes expanded, there was to be sure an impact on EPZs, yet it had a
significant effect.
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1.3Objectives
1.3.1 General Objective
The general objective of this study was to build up the impacts of tax incentives on the
performance of Export handling zones (EPZ) firms in Kenya.
1.3.2Specific Objectives
The following specific objectives were used as guiding drivers of the study.
i. To find out if corporate income tax holiday incentive affects the performance of
EPZ firms in Kenya.
ii. To establish if withholding tax holiday incentive affects the performance of EPZ
firms in Kenya.
iii. To determine if import duty exemptions affect the performance of EPZ firms in
Kenya.
iv. To find if capital allowance tax incentive affects the performance of EPZ firms
in Kenya.
1.4 Research Questions

This study aimed to answer the following questions.
i. How does corporate income tax affect the performance of EPZ firms in Kenya?
ii. How does withholding tax affect the performance of EPZ firms in Kenya?
iii. How does a duty exemption affect the performance of EPZ firms in Kenya?
iv. How does capital allowance tax affect the performance of EPZ firms in Kenya?
1.5 Justification
Albeit a few examinations have featured different marvels in respect to charge impetuses,
none appeared to feature the impact of duty motivating forces on the general execution of
EPZ firms. This research expected to conquer any hindrance between these investigations and
explore the impacts of export impetuses on the general execution of EPZ firms in Kenya.
This research was of incredible essentialness as in, the exploration questions were replied; it
carried new learning as for the impacts of export motivating forces on the general execution
on EPZ firms in the nation. It along these lines gives a more profound comprehension to
specialists, speculators, and government officials who might discover the exploration of
incredible intrigue. Scholastic researchers, analysts and other academicians would utilize the
information accumulated and it will provide rich data in this study to propel the subject and
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concoct new investments that clarify the impact of these assessment motivating forces on the
presentation of EPZ firms. The different partners in the individual businesses can utilize the
data at the same time in this research to either redress past missteps, or receive new strategies
of tax collection, or help in streamlining the entire procedure of exportation. Over the data
and information that as of now exists, this exploration makes colossal commitment, and can
be utilized as a kind of perspective point by those intrigued by the subject. Governments can
likewise use in helping either new companies or built up organizations in transit forward to
misuse and augment their potential. In this way, in the period of globalization, it is critical to
have the data effectively accessible, and this exploration adds to having a wide scope of the
accessible data
1.6 Scope of the Study

Athi River Export Processing Zone was chosen and utilized for this investigation as it
represents 69 working firms (as at 2017) out of the 131 EPZ firms situated in Kenya. The
focal point of the investigation focused on finance managers, human asset administrators and
the managerial officials responsible for tasks in the EPZ firms in Athi River EPZ. It likewise
incorporated tax managers and senior directors from the individual EPZ firms. This
examination study was directed in the year 2019 and information from the year 2011 to 2017
in respect to EPZs was utilized.
1.7 Limitations of the Study

The idea of this study required an accentuation on secret data identified with the assembling
firms. Divulgence of such private data made the respondents feel encroached and
consequently they were guaranteed of secrecy and moral treatment of the data they gave.
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CHAPTER TWO
LITERATURE REVIEW
2.1 Introduction
This part clarifies in detail the important writing that identifies with foundation of the
investigation. It shows discoveries from various analysts, the scholarly world and researchers
in the branches of knowledge of this study. This part fundamentally audits the subject; it
starts with an examination of the hypotheses that provide guidance to this investigation, done
as such that the research can have a solid hypothetical establishment. Following the
hypotheses is the calculated system and finally an audit of observational investigations done
to finish the part. Most of data in this section will be sources from articles from papers,
reports from government affiliations, insightful journals and books, all pertinent to the subject
inspected in this examination.
2.2 Theoretical Literature Review

This area is a discourse of the different speculations and ideas in respect to assess impetuses
and an enunciation of how these motivations influence the money related execution of EPZ
firms. The speculations talked about under this segment incorporate the bunch approach
hypothesis, the regularizing hypothesis and the organization hypothesis of duty impetuses
2.2.1 Cluster Approach Theory

Developed by Michael Porter in 1990, the Cluster Approach Theory was founded on the
concept of competitive advantage and has for a long while been used by many governments
and organizations around the world as a springboard or criteria for improvement. Porter came
up with this theory based on the idea that investments would be viable and register good
financial performances while they are closer to each other (Collins, Bosworth & Soto-Class,
2006). He argued that EPZs, where firms share a common geographical location, enjoy
common factors such as infrastructural development; a pool of skilled labor, technical
support and the transfer of technology will be evident. The clusters approach by EPZs
constraints the ability of the government to impose itself on the firms what's more, after that
analyzing the ensuing implications for duty rivalry. One such point of view is the
insufficiency in an administration's in respect to the associations or firms that it attempts to
do an appraisal. For instance, firms may have a distinction in interregional flexibility, yet
such contrasts may be inconvenient for the legislature to keep watch. In such a case, the
specialists can't charge a firm in a manner that direct relies upon its inconspicuous pieces of
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firm lead that may fill in as indications of these characteristics, for instance, the
organization's business adventure decisions (Kuria, 2018)
For a period of time now, tax incentives which have targeted particular geographical
locations have been implemented by policy makers across all levels of the government. It is
worth noting that these incentives have not been uniform from a jurisdiction to the other as
they differ greatly. Some tax incentives are meant for capital investment while others are
meant to aid in the creation of employment opportunities or other purposes, but in effect they
achieve a common cause, which is to effect a tax treatment. Much of the emphasis from
previous research on tax incentives which differ from a region to the other have been on job
creation. The cluster approach theory is relevant to this research as it incorporates corporate
income tax incentive, capital allowance, custom duty exemptions and withholding tax
holidays.
2.2.2 Normative Theory

This theory deposits that every incentive given has its advantages and disadvantages
(Habermas, 2009) and therefore, it is difficult to tell which incentives will work better in a
certain sector of the economy and which will not with respect to the prevailing challenging
and circumstances. The foundation of this theory comes from the practical applicability of
administrating tax on subjects. Thus, depending on the method of tax administration, the
incentives given are bound to be effective upon implementation by the government
authorities and agencies. It is therefore pertinent that, the success of the various tax
incentives, is dependent on the tax policies and administration method put in place. As
Tresch, (2014) notes, the theory provides a model which is clear, and gives guidance in that
guides description and explanation of the different methods of tax administration as well as
prediction of its efficiency in applicability. Through this, Boadway, Chua and Flatters (2008)
argue that such incentives are vulnerable to abuse and corruption from the public servants
working for the respective government agencies.
With regard to how the theory is relevant in this study, theory has crucial and significant
provision in variables with respect to capital allowance tax incentives and corporate income
tax holiday. These variables, come with them tax incentives which are not expensive or costly
in simulating investment in machinery, plants or raw materials for the firms within export
processing zones. The study by Chukwumerije and Akinyomi, (2011) indicates that these
incentives through the right policies, the impact could be powerful, and there would not be
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any significant loss in revenue. For a tax incentive to be considered sound and ideal in the
existing conditions, like for instance in Kenya, the corporate tax has to be drawn to levels
comparable with other countries in the region. However, if it does not compare to the other
corporate taxes in other exporting countries and the reductions are more, the discrepancy
would be high thus resulting to a poor performance due to losses in revenue and less gains in
investment, as well as lack of skilled labour. The theory has been widely used in the past, in
many studies relative to the impact of tax incentives on the various facets of the economy,
either on performance, growth, or investment.
As per Fletcher, (2003) a current tax incentive force might be viewed as sound and perfect
for the predominant conditions in the event that it can fundamentally attract corporate
expense to levels that can be contrasted to what is applicable to other nations working in a
similar geographical region. A tax incentive that achieves enormous inconsistencies in
corporate duty between a nation and its neighbors will straightforwardly influence its tasks
and in this way placed it in an impeded position in respect to the exchanging accomplices
within that locale. Tresch (2014), argues that alteration ought to anyway not fall route
underneath the level that exists in capital exporting economies. For example, if the corporate
assessment is beneath 20% when contrasted and the other trading nations, at that point it
might result to more noteworthy misfortunes in income than the anticipated gains in venture.
2.2.3 The Agency Theory of Tax Incentives

There is no any considerable proof to help the effectiveness of the different monetary
motivations despite the fact that administration organizations still give them out. Wells et al.
(2001) contended that duty motivators offer a simple path in repaying the hindrances made by
these administration organizations in the market or monetary condition. This essentially
implies the expense impetuses given out, are as a reaction to the disappointment by the
legislature to force itself adequately available and guarantee the business condition
encourages development and improvement. It is significant that because of these legislature
made obstructions, some of them can't be tackled by simply insignificant duty incentive
forces and in this manner, are costly and take longer in executing a proficient and sufficient
assessment organization which will unravel such impediments. So as to address the
contortion pattern, a down to earth route is through the arrangement of impetuses. There exist
organization issues between the administration and its particular offices ordered with the
assignment of making and pulling in venture. While the offices accept a huge job in pushing
for motivating forces which elevate and make venture to the business condition, the
9
effectiveness of the motivators does not accomplish the normal outcomes or are not profitable
enough as the expenses are high. The justification of joining this hypothesis to this
examination is that the administration offices do evaluate the viability of the tax incentive,
say import duty exceptions in initiating more generation and hence improved generally
speaking performance.
2.3 Conceptual Framework

Conceptual framework is a chart which represents the connection in independent and
dependent variable. The independent variable is the variable which shows incredible security
and stays unaffected by different factors that are being estimated. . It alludes to the state of a
trial that is efficiently controlled by the specialist. It is speaks to the reason. Then again, a
dependent variable is characterized as the variable which relies upon different elements that
are being estimated. Such factors are relied upon to change or differ because of an
exploratory control of the independent variables. It speaks with the impact. The autonomous
factors in this investigation are different assessment motivators which incorporate corporate
personal expense occasion impetus, retaining assessment occasion motivation, import duty
exclusions and capital allowance tax incentive while the presentation of EPZ firms
comprehensive of significant worth expansion, work creation, abilities or innovation move
and outside trade additions speaks to the dependent variable. The calculated relationship
between factors is demonstrated as follows.
10
Independent Variables Dependent Variables
Corporate Income Tax Holiday

Income Tax
Withholding Tax Holiday
Dividends
Other remittances
Performance of EPZ Firms
Job creation
Skill and technology

Duty Exemptions
transfer
Import duty
VAT Foreign exchange
Other government levies earnings
Capital Allowance Tax

Plant and Machinery
Land and Buildings
Figure 2. 1 Conceptual Framework
2.4 Measurements of Performance

Execution is characterized as the achievement of an undertaking estimated in the norms of
exactness or cost. Relevantly, it is characterized as the components which add to productivity
on tasks, initiate development. Execution reaches out to how an organization or firm utilizes
its assets towards the accomplishment of its targets. This exploration estimates by and large
execution through four angles: esteem expansion, work creation, abilities or innovation move
and outside trade profit. This will be conceivable by investigating development in the
11
quantity of representatives in the EPZ firms, amount of imports and fares just as profits for
speculations.
2.5 Empirical Literature Review
Numerous worldwide and nearby researchers have finished up numerous investigations
concerning the impact of expense motivators on specific aspects of the economy. They are
illustrated beneath in reference to each duty motivating force advertised.
2.5.1 Types of Tax Incentives

The primary goal of an expense framework is to enable the legislature to bring income to help
up in its tasks and conveyance of administrations. An expense motivation in this manner
helps an individual, a business substance or an association in a positive manner through the
arrangement of an assessment treatment which helps spike business exercises in various
divisions. There are four assessment motivations examined in this examination.
2.5.1.1 Corporate Income Tax Holiday

Corporate annual duty is the assessment which is imposed by a state government on the
benefits made by organizations. Numerous organizations utilize various courses in the
expense code to guarantee that they bring down the costs they acquire in installment of
charges. To help organizations in different ventures record superior exhibitions monetarily
and help in starting speculation, the administration gives duty occasions. As indicated by the
Export Processing Zone Authority, a multiyear corporate personal assessment occasion is
given with a 25% expense rate forced from that point. Also, the corporate expense rate forced
for the other nearby organizations is 30% while other outside organizations pay 37.5%. This
demonstrates the brilliant program that the administration has thought of to guarantee
achievement and development in the EPZ area (EPZA Kenya, 2018). Gumo (2013)
researched the connection between duty motivations and ventures. Auxiliary information
acquired from Export Processing Zone Authority, Kenya Revenue Authority and Kenya
National Bureau of Statistics was utilized in the examination. Elucidating measurement,
relationship and different direct relapse models were utilized during the time spent
information investigation. He reasoned that corporate annual expense occasion motivation
has a positive association with remote direct ventures as it spikes both nearby and outside
speculation which positive effects the exhibition of an EPZ firm. An examination by Klinger
and McFate (2013) which researched the impact of lower assesses on corporate benefits
12
found that there was no connection between lower charges and corporate benefits or
occupation creation.
2.5.1.2 Withholding Tax Holiday

This is the expense deducted at source from installments like salary intrigue, profits, annuities
and other related settlements. They could be demanded as a last charge or a development
charge installment. A multi-year retaining assessment occasion on profits and different
settlements is given to alien gatherings in EPZ. The duty rates for this situation after the
shroud of the 10 years vary contingent upon the sort of installment that is, benefits, intrigue,
profits, and so on. In an offer to build up the connection between duty motivating forces and
interest in Middle East and Northern Africa (MENA) just as non-MENA nations,
Organization for Economic Co-activity and Development (OECD) in 2007, it was discovered
that a poor business condition couldn't be remunerated by either retaining assessment
motivators or different types of expense sponsorships from the legislature. Giving assessment
impetuses with a poor infrastructural advancement, disintegration of duty base was in all
likelihood and in this manner, very few speculations would be attracted to the economy.
Ireland and Malaysia were a portion of the nations which pulled in venture without giving
expense motivating forces; rather, they concentrated on improving the framework and
guaranteeing a decent political and monetary atmosphere. Onyango (2015) in his examination
to build up the impact of duty motivating forces on five star inns in Kenya discovered that
immediate assessment motivators (counting retaining expense occasion impetuses) helped
lodgings record high benefits in this manner prompting development and their particular
advancement.
2.5.1.3 Duty Exemptions

Import obligation is the duty gathered by the custom experts and organizations from the
administration on imports. By and by, when products are dispatched from another nation to
Kenya, the proprietor or buyer of the merchandise pays a 25% traditions obligation expense.
The import obligation exemptions are a motivating force given to speculators in the area, for
instance the EPZ, who are either developing or redesigning their offices. It likewise applies to
crude materials, hardware, office gear, building materials among different supplies. For a
nation to invigorate its fares, the custom obligation motivators relevant must be utilized
something like productivity to wealth to give the nation and the separate firms an aggressive
edge in the worldwide market. Alegana (2014) tried to build up the impacts of assessment
motivations on the financial development in Kenya, she discovered that import exception to
13
don't add to monetary development, with negligible development rate in the economy
announced as import exclusions keep on expanding increment altogether. Kandie (2011) in
his investigation on the impacts of expense motivating forces on exchequer income in the
nation reasoned that import charge impetuses have a negative consequence for exchequer
incomes. With the consistent shortfalls in the spending financing, such charge motivators
don't help in filling the income holes or deficiencies in the spending limit.
2.5.1.4 Capital Allowance Tax

Capital remittances are charge motivating forces given to firms and associations on capital
consumption. These expenses are permissible in this manner firms can't be burdened on them.
Some use which gets this assessment help incorporate the mileage recompenses, modern
structure derivation, speculation finding and homestead works reasonings and related
hardware. Ngure (2018) did an examination to build up the connection between assessment
impetuses and financial development in Kenya. The investigation populace was all the 725
assembling firms in all classifications (huge, medium and little) under the Kenya Association
of Manufacturers index as at 2016. Chosen haphazardly, the investigation examined 90
organizations and gathering of optional information for a multi year time span was gathered
from the yearly reports and the association's interior sources. Ngure discovered that capital
stipend charge motivations diverted by the administration on apparatus, plant and crude
materials to the assembling firms in Kenya influenced the exhibition of the assembling
business and along these lines improved the proficiency levels of the populace.
Chukwumerije and Akinyomi (2011) tried to discover the effect of assessment motivating
forces on the general execution of enrolled little scale enterprises in Rivers State, Nigeria.
Out of the 22 enlisted businesses, 11 were chosen arbitrarily and 260 respondents from the
enterprises associated with information accumulation using polls. Recurrence conveyance
and chi-square tests were utilized in information examination and testing of speculations. It
was capital expense recompenses, as a feature of the few assessment motivating forces
offered to SMEs fundamentally affected these enterprises with checked enhancements in
benefits noted, prompting their extension, development and improvement.
2.6 Critique of Existing Literature

This section has investigated different examinations from various researchers who featured
various factors. All through the audit, different tops were not secured, accordingly the
uncovering the writing holes in the particular examinations. Chukwumerije and Akinyomi
14
(2011) examined the connection between assessment motivating forces and execution of
SMEs in River State, Nigeria. It was set up that the relationship was emphatically
noteworthy, on each part of the SMEs. Gumo (2013) examined the impact of expense
motivating forces on remote direct venture however did not search out the effect of the
impetuses on the general execution of EPZs. In addition, Gumo's investigation reasoned that
only one out of every odd duty motivating force was sure, as others had a negative effect.
Onyango (2015), hoped to set up the effect of cost inspirations on cash related execution of
five-star motels in Nairobi County, anyway did not address the EPZs. This assessment
consequently, hopes to conquer any issues recorded as a hard copy, and research the impact
of cost helpers on the general execution of passage planning zones, using the Athi River EPZ
as a logical examination.
2.7 Summary of Literature Reviewed

This examination intended to connect the exploration hole by investigating the effects of duty
motivators available on the exhibition of EPZ firms in Kenya. The area moreover examined
the conceptualization of the reliant variable and free factors by separating the associations
between the two game plans of elements. The dependent variable is execution of EPZ firms
while the free factors are addressed by the corporate yearly cost inspiration, capital reward,
VAT catalysts, customs obligation motivations powers and expense impetus
The section talked about in detail, the different hypotheses which are with respect to both the
autonomous variable and the needy variable and demonstrated the connection that exists. In
exact writing, the part investigated numerous researchers, both global and nearby, who have
recently investigated the assessment motivation variables and its impacts on various aspects.
For instance, Gumo (2013), Ngure (2018), (Barbour (2005), Chukwumerije and Akinyomi
(2011), Musyoka (2012), Kimeu (2013), and Klinger and McFate (2013) utilized various
factors to clarify the impact of tax incentives. Through the study, the section featured the
current research holes that this examination plans to fill.
2.7 Research Gaps
In spite of the expanded consideration on Tax and most particularly on Export procedure
zone none of the examinations has tended with the impacts of assessment motivations on the
presentation of EPZ firms in Kenya. In the writing surveyed, charge effect on Kenya EPZ
firms and its impact on execution of EPZ firms was not exactly explored, in this way it isn't
evident whether assessment were diminishing the presentation or expanding in Kenya. The
15
available examinations tended to cash related execution of EPZ firms yet none seemed to
address the effect of obligation inspirations on the general execution of EPZ firms. This
assessment will thusly revolve around social affair fundamental data that assesses the
veritable situation on the ground, even more so at the EPZ Athi River.
16
CHAPTER THREE
RESEARCH METHODOLOGY
3.1 Introduction
This part intended to give an understanding into the approaches utilized by the scientist in the
investigation. It clarifies the examination structure and technique utilized. The objective
populace is tended to just as the strategies for information gathering. The information
preparing and examination procedures are additionally talked about in the section. The
commitment to this examination has originated from both the utilization of essential
information and optional information. Essential information is information that was gathered
by the analyst through surveys. Then again, auxiliary information was gathered from existing
investigates and concentrates by different researchers and include the re-examination of the
information that answers a similar inquiry utilizing past information to respond to the
exploration questions suitably (Saunders, 2015). Essential information will be gathered from
Athi River EPZ to give a thought of the presentation of firms in EPZs in Kenya. EPZ firms in
Kenya shaped the wellspring of optional information during the year 2011-2017.
3.2 Research Design
The exploration configuration is characterized as the general arrangement that is identified
with the subject issue of the examination and has significance as indicated by the
experimental research of the investigation. It is the arrangement to be followed in responding
to the exploration questions. Subject to the examination goals, the exploration configuration
gives a rule on the fitting information accumulation strategies to be utilized in the
examination, through a cognizant and successful incorporation of parts in the investigation
(Saldanha, 2015). Among the different research plans utilized in this examination is the
contextual investigation. It is one of the strategies that are generally utilized in the
accumulation of subjective information. It includes investigating in subtleties a specific case
either in the network, business or an association (Saunders et al., 2015). In this unique
situation, the contextual analysis will be done inside the EPZs in the Kenya. At the point
when an exploration configuration like the contextual investigation is utilized, questions like
how, when, in which way among others are replied.
17
3.3 Target Population
A populace is characterized as a gathering of people, occasions or articles which have basic
discernible qualities. The objective populace in this examination will be the staff in Athi
River EPZ. The examination will concentrate on the different individuals from staff chose
from various firms which appreciate charge impetuses.
Table 3. 1 Target Population
Category Population
Top Level Management 5
Middle Level Management 10
Operational 90
Total 105
3.4 Data Collection Methods

Data collection involved gathering pieces of information that will allow the researcher to find
an answer to the research problem (Fletcher, 2016). In this section, the method used by the
researcher in collection of data was use of questionnaires and secondary data sheets.
3.5 Sample and Sampling Frame

In the field of research, sampling involved selection of individuals, a subset, from a
population in which the researcher can gather or estimate the characteristics of the population
so as to give true feedback (Gillett-Swan, 2017). The researcher used a sample size of 69
employees from Athi River EPZ.
18
Table 3. 2Sample Size
Category Frequency Sample Size Percentage
Top Level Management 5 3 4
Middle Level Management 10 7 10
Operational 90 59 86
Total 105 69 100
3.6 Questionnaire Design

A decent poll configuration helps the analyst in getting right and believable criticism from the
tested populace. To accomplish the targets of the study, the analyst gives exact data with the
goal that the respondents of the study can have it simple in giving criticism; generally, a
muddled poll may give the respondents' troublesome time filling (Saunders et al., 2015). The
poll in this exploration is structured so that it makes a decent and clear aim, the translation is
basic and the appropriate responses should be as immediate. To improve the reaction rate, the
polls will be dropped to the separate respondents and picked sometime in the future.
3.7 Data Processing and Analysis

After the collection of essential information, the investigation utilized both the expressive and
inferential measurements in the examination of the field information. Spellbinding
measurements strategies depicted the essential highlights of the information. By utilizing
proportions of focal propensity like mean, mode and middle, the researcher gives an
understanding of the basic features of the population. On the other hand, inferential statistics
use sample of data taken from a population in describing and making inferences about the
population.
3.7.1 Model Specification

So as to do an analysis of the impact that tax incentive has on the exhibition of EPZ firms in
Kenya, the investigation will do a change of the pooled board information model utilized by
Ban˜os-Caballero, García-Teruel, and Martínez-Solano (2011), which is delineated in the
condition 3.1. This examination will utilize pooled board information relapse model to
research the impact of expense motivating forces on execution of EPZ firms in Kenya. As
indicated by (Hsiao, 2003), board information has perceptions from different marvels which
19
is gotten in various numerous timeframes for a similar firm or association. Such information
is favored as it uncovers the progressions that happen at the association's level and builds up
time request of factors to delineate the rise of connections (Frees, 2004). Since the
investigation centers around the 69 EPZ workers, utilizing cross-segment information alone
gave a little example however consolidating the time arrangement of 7 years, the example
will grow to 483 perceptions. As indicated by Gujarati (2003) the resultant huge example will
make it feasible for the examination to fulfill asymptotic prerequisites. The general exact
model utilized in the investigation is characterized as follows
Yit= α + β Xit + εit ………………………………………………………… (3.1)
Where: Yit is the dependent variable denoting performance of EPZ firm i at time t; t denoting
the observation (firm), i = 1…… 30 while t is the time period, t = 2011…… 2017. Xit
denotes a vector of independent variables, β are coefficients to be estimated, α is a constant
term, and εit is a composite error term.
Equation 3.1 undergoes expansion to obtain equations 3.2 which will be used for estimation.
Yit = α + β1Ait + β2Bit + β3Cit + β4Dit + εit………………………………… (3.2)
Where;
Yit = Performance of firm I at time t;
Ait = Corporate personal expense that has been postponed for firm I at time t;
Bit = Capital remittances gotten by firm I at time t;
Cit = Duty exclusions that firm I has profited at time t;
Dit = Withholding expense occasion motivating force that firm I has profited at time t;
α= Constant term.
βs = Coefficients of the free factors;
Subscript i= Firms (cross-area measurements) going from 1 to 69;
Subscript t = Years (time-arrangement measurements) extending from 2011 to 2017;
20
εit = Composite mistake term of the model
Occupation Creation = β0it + β1itCorporate Income Tax Incentives + β2itCapital Allowance

+ β3itImport obligation exceptions + β4itExcise Tax Incentive + β5itWithholding charge
incentives+ εit
Abilities Transfer = β0it + β1itCorporate Income Tax Incentives + β2itCapital Allowance +

β3itImport obligation exceptions + β4itExcise Tax Incentive + β5itWithholding charge
incentives+ εit
Outside Exchange Earnings = β0it + β1itCorporate Income Tax Incentives + β2itCapital

Allowance + β3itImport obligation exclusions + β4itExcise Tax Incentive + β5itWithholding
charge incentives+ εit
The board information was poor down using unmistakable insights estimations, connections
and relapse examination. The board information philosophy was supported by STATA
programming which is a measurable programming program with higher levels capacity to
break down board dataset. Feasible Generalized Least Square estimation was done after a
record for various encroachment of customary direct doubts is done. There are three unique
methods for assessing board information model: the Pooled Ordinary Least Square (OLS)
backslide model, Fixed Effect (FE) model and Random Effect (RE) model. The strategy used
for this circumstance is liable to if the individual cross-zone effects are seen as reliable, fixed
or unpredictable. Along these lines, every one of the three models assessed and a short time
later the fundamental tests associated before a choice on the best possible model is made. In
any case, the likelihood that the unit-express effects did not differentiate in Pooled OLS
backslide model made it incredibly restrictive and regularly absurd. As fought by Baum
(2006), Pooled OLS backslide can have a jumbled mix-up methodology, for instance,
heteroscedasticity across over board units and successive relationship inside board units. Due
its extraordinary limitations, this examination considered the FE or RE models
21
CHAPTER FOUR
RESULTS AND DISCUSSION

4.1 Introduction
This chapter gives the results of the analysis of the data that were ascertained from the
questionnaire as outlined in the research methodology in the previous chapter.
4.2 Response Rate
From the results, there were 45 respondents out of a total sample of 69 translating to 65%
response rate. This, according to cooper and Schindler (2003) is a good response rate for the
data collection tool used. Constant calls and follow up to the respondents was one of the
reasons for the high response rate.
Table 4. 1Response Rate
Response Rate Frequency Percentage (%)
Response 45 65
No response 24 35
Total 69 100
4.3 Demographics
Demographics gives a description of the respondents, giving features such as experience,
education level and the type of goods.
4.3.1 Level of Education

Table 4. 2 Level of Education
Category Frequency Percentage

Secondary level 8 18
College level 10 22
Degree level 15 33
Post graduate level 7 16
Doctorate level 5 11
Total 45 100
22
45%
33%
40%
35%
30%
22%
25%
18%
20%
15%
10%
16%
5%
0% 11%
Secondary
college
degree
post graduate
doctorate
Figure 4. 1 Level of Education

Table 4.2 and figure 4.1 indicates the response from the Secondary level were 18%, college
level represented 22%, those from degree represented 33%, those from post graduate
represented 16% and those who reached post doctorate level of education represented 11%.
4.3.2 Working Experience

Table 4. 3 Working Experience

Less than 2 Year 10 22
3-5 Years 20 45
Above 5 Years 15 33
Total 45 100
23
45%
45%
40%
35%
33%
30%
Percentage
25% 22%
20%
15%
10%
5%
0%
less than 2 years

3-5 years
Above 5 years
Figure 4. 2 Working Experience.

From table 4.3 and figure 4.2 shows that 22% of the respondents had worked in the
organization for less than 2 year, 45% between 3-5 years, and 33% had worked in the for
more than 5 years.
Table 4. 4 Level of Employment

Top Level Management 2 4
Middle Level Management 5 12
Operational staffs 38 84
Total 45 100
24
90%
84%
80%
70%
60%
Percentage
50%
40%
30%
20%
4% 12%
10%
0%
top level management

middle level
management operation
Figure 4. 3 Level of Employment

From table 4.4 and figure 4.3, 4% of the respondents were top level administration, 12%
center level administration and 84% of the respondents were in the activities level.
4.4 Factors impacting Tax Incentives on the exhibition of EPZ firms.
Illustrative investigation was utilized to determine the impact of indicator factors on expense
motivators. From the investigation of the information, the outcomes are as demonstrated as
follows.
4.4.1 Corporate Income Tax for primary data
Table 4. 5 Effect of Corporate Income Tax on performance of EPZ Firms in Kenya.
Category Response Percentage

Yes 40 89
No 5 11
Total 45 100
25
11%
89%
Figure 4. 4 Effect of Corporate Income Tax on performance of EPZ Firms in Kenya.

From table 4.4 and figure 4.3, 4% of the respondents were top level administration, 12%
center level administration and 84% of the respondents were in the activities level.
4.4 Factors impacting Tax Incentives on the exhibition of EPZ firms.
Illustrative investigation was utilized to discover the impact of indicator factors on
assessment motivating forces. From the examination of the information, the outcomes are as
demonstrated as follows.
Table 4. 6 Extent to which Corporate Income Tax affects performance of EPZ Firms in
Kenya

No 5 12
Low 6 13
Moderate 9 20
High 15 33
Very High 10 22
Total 45 100
26
35%
33%
30%
25%
20% 20% 22%
15%
11% 12%
10%
5%
0%
No Effects
low Effects
Moderate
Effect High Effect
very High
Effect
Figure 4. 5 Effects of Corporate Income Tax on execution of EPZ Firms in Kenya
On the Effects of Corporate Income Tax on execution of EPZ Firms in Kenya, table 4.6 and
figure 4.5 above demonstrates that 12% of the respondents said the impact is high, 13% of the
respondents showed to a high impact, 20% of the respondents showed on a moderate impact,
33% of the respondents showed low impact while the staying 22% of the respondents said
that there was no impact.
4.4.1.1 Description of Corporate Income Tax from Secondary Data
The investigation directed an evaluation on corporate annual expense motivating force that
the EPZ firms profited by 2011 to 2017. The discoveries demonstrated an expanding pattern
of corporate annual assessment motivating force deferred for EPZ firms in Kenya. In 2011 an
aggregate of about KES 45,547,871 as far as corporate annual expense was postponed. In
2014 the figures tumble to about Kshs 43 million which expanded to Kshs 52 million the next
year. The most noteworthy corporate personal assessment postponed was in the year 2017
which added up to Kshs 54,842,540.
27
Table 4. 7 Descriptive Corporate Income Tax Incentive on EPZ firms performance
Year N Mean (Million) Std. Deviation

2011 20 45,547,871 22,773,926
2012 21 47,733,489 23,866,734
2013 23 47,204,195 23,602,086
2014 31 43,982,932 21,991,451
2015 18 54,127,925 27,663,953
2016 19 46,786,138 23,393,060
2017 22 52,842,540 26,421,259
Total 154 48,317,870 24,244,638
The trend analysis in the table above indicates that corporate income tax incentive for the
EPZ firms has been fluctuating from 2011 to 2017 with the lowest and the highest waiver
occurring in 2014 and 2015 respectively.
4.4.1.2 Effects of Corporate Income Incentive on Number of jobs
The results presented in table 4.8 present the fitness of model used of the regression model in
explaining the study phenomena. Corporate income tax explained 21.2% of variation in
Number of jobs .The pattern investigation in the table above shows that corporate annual
expense motivating force for the EPZ firms has been fluctuating from 2011 to 2017 with the
most reduced and the most noteworthy waiver happening in 2014 and 2015 separately.
4.4.1.2 Effects of Corporate Income Incentive on Number of employments
The outcomes exhibited in table 4.8 present the wellness of model utilized of the relapse
model in clarifying the examination wonders. Corporate personal expense clarified 21.2% of
variety in Number of occupations
Table 4. 8 Model Fitness
Indicator Coefficient
R 0.46
R Square 0.212
Adjusted R Square 0.0435
Std. Error of the Estimate 4.8953
The study conducted a linear regression to ascertain the influence of corporate income tax
incentive on the EPZ firm‘s performance. The performance of firms was measured by the
total number of workers.
28
Table 4. 9 Effects of Corporate Income Incentive on Number of jobs
B Std. Error Beta T Sig.
Constant -5.88 0.587 -10.01 0.000
Log corporate 0.656 0.036 0.64 18.296 0.000

Income incentive
Y = - 5.88+ 0.656 X
Y=Ln (Total Number of laborers (EPZ Performance)
X=Ln (Corporate Income charge Incentive)
From the discoveries, the examination inferred that corporate annual duty motivating force
has a positive association with the presentation of EPZ firms as estimated utilizing the
complete number of laborers made in Kenya
4.4.1.3 Effects of Corporate Income Tax on Technology
The results presented in table present the fitness of model used of the regression model in
explaining the study phenomena. Corporate income incentives explained 31.3% of variation
in Technology.
R 0.56
R Square 0.313
29
Table 4. 11 Effects of corporate Income Incentive on technology
Parameter Estimate B Std. Error Beta t Sig.
Constant -2.345 3.981 0.002

Log Corporate Income 0.233 0.2331 0.289 23.899 0.000
Incentive
The following was tested
The examination led a direct relapse to build up the impact of corporate annual duty
motivation on the EPZ association's exhibition. The presentation of firms was estimated by
Innovation.
Y = - 2.345+ 0.233 X
Y=Ln (innovation (EPZ Performance)
From the discoveries, the likelihood esteem (p-esteem = 0.000) was not exactly the
expectedly estimation of 0.05. In this way, the investigation presumes that corporate personal
expense motivating force has a constructive association with the exhibition of EPZ firms in
Kenya.
4.4.1.4 Effects of Corporate Income Incentive on Foreign Exchange Earnings
The outcomes displayed in table beneath demonstrate the wellness of model utilized of the
relapse model in clarifying the investigation. Corporate pay motivating forces clarified 24%
of variety in Foreign Exchange
R 0.49
R Square 0.240
The study conducted a linear regression to ascertain the influence of corporate income tax
foreign exchange.
30
Table 4. 13 Effects of Corporate Income Incentive on Foreign Exchange
Parameter B Std. Error Beta t Sig.

(Constant) -3.972 0.498 -7.969 0.000
corporate
Income incentive 0.339 0.03 0.515 11.356 0.000
Y = - 3.972+ 0.339 X
Y=Ln (Foreign Exchange (EPZ Performance)

From the discoveries, the examination dismissed the invalid recommendation that corporate
personal assessment motivation has no huge association with execution of EPZ firms in
Kenya. This is on the grounds that the likelihood esteem (p-esteem = 0.000) was not exactly
the traditionally estimation of 0.05. In this manner, the examination reasoned that corporate
annual expense motivating force has a positive association with the exhibition of EPZ firms
as estimated utilizing outside trade
4.4.2 Withholding Tax for primary data
Table 4. 14 Effect of withholding Tax on performance of EPZ Firms in Kenya.
Category Response Percentage

Yes 38 84
No 7 16
Total 45 100
16%
84%
Figure 4. 5Effect of withholding Tax on performance of EPZ Firms in Kenya.
31
The analysis from table 4.14 and figure 4.6 above shows the responses on whether
withholding Tax incentives affects performance of EPZ Firms in Kenya. According to the
study, 84% of the respondents indicated that it has an effect on performance of EPZ Firms in
Kenya while the remaining 16% of the respondents indicated that it does not affects
performance of EPZ Firms in Kenya.
Table 4. 15what is the effect of withholding Tax on performance of EPZ Firms in Kenya.

No 2 4
Low 5 11
Moderate 9 20
High 17 38
Very High 12 27
Total 45 100
40% 38%
35%
30%
25% 27%
20% 20%
15% 11%
10% 4%
5%
0%
No Effect
Low
Moderate
High Effect
very high
effect
Figure 4. 6Effect of withholding Tax on performance of EPZ Firms in Kenya.

From table 4.15 and figure 4.7above 27% of the respondents indicated to a very high effect of
withholding tax on EPZ performance, 38% of the respondents said the effect is high, 20% of
the respondents indicated on a moderate, 11% of the respondents indicates low while the
remaining 4% of the respondents said no extent.
32
4.4.2.1 Withholding Tax for secondary data
The results in the Table below show the mean for year 2011 to 2017 for withholding Tax for
EPZ firms in Kenya. The result indicated that withholding tax for EPZ firms has been
increasing across time. A cumulative total of 148 firms benefited from withholding Tax.
Table 4. 16 Withholding tax Statement from Secondary Data
Year N Mean (Millions) Std. Deviation

2011 21 54,082,118 48,798,620
2012 20 12,116,015 77,276,955
2013 18 53,629,966 57,906,898
2014 20 23,636,443 57,511,760
2015 15 40,164,248 17,095,486
2016 30 24,217,706 31,798,682
2017 24 30,243,305 37,080,179
Total 148 34,012,828 50,062,882
4.5.2 Effects of withholding tax on the Number of jobs
The results presented in table present the fitness of model used of the regression model in
explaining the study. Withholding explained 22.5% of variation in Number of jobs.
R 0.150
R Square 0.225
The study conducted a linear regression to ascertain the influence of withholding tax on the
EPZ firm‘s performance. The performance of firms was measured by the total number of
workers.
33
Table 4. 18 Effects of withholding tax Incentive on the Number of jobs
Parameter B Std. Error Beta T Sig.

Constant -4.138 0.47 -8.812 0.000
Log withholding 0.525 0.028 0.564 18.928 0.000
Tax
H0: There is no critical connection between retention expense and execution of EPZ firms in
Kenya.
Y = - 4.138+ 0.525X
Y=Ln (Number of employments (EPZ Performance)
X=Ln (Custom obligation Incentive)
From the discoveries, the likelihood esteem (p-value= 0.000) was not exactly the traditionally
estimation of 0.05. In this way, the examination presumed that retaining assessment has a
positive association with the presentation of EPZ firms as estimated utilizing the complete
number of laborers in Kenya.
4.4.2.3 Effects of retention charge on Technology
The outcomes displayed in table underneath demonstrate the wellness of model utilized of the
relapse model in clarifying the examination wonders. Retaining duty clarified 50.1% of minor
departure from innovation.
R 0.710
R Square 0.501
This study aimed to determine the effect of withholding tax on the performance of EPZ firms
in Kenya. A linear regression model was adopted to ascertain the relationship between
34
withholding tax and performance of EPZ firms which was measured by technology. The
findings are shown in Table below.
Table 4. 20 Effects of withholding tax on technology

(Constant) -2.543 2.812 0.000
Log withholding 0.521 0.195 0.461 11.971 0.000

Incentive
H0: There is no noteworthy connection between Custom obligation Incentive and execution
of EPZ firms in Kenya.
Y = - 2.543+ 0.521X
Y=Ln (innovation (EPZ Performance)
X=Ln (retaining charge)
From the discoveries, the likelihood esteem (p-esteem = 0.000) was not exactly the routinely
estimation of 0.05. Along these lines, the investigation reasons that retaining assessment has a
positive association with the presentation of EPZ firms in Kenya.
4.4.2.4 Effects of retention charge on remote trade

The outcomes exhibited in table 4.48 present the wellness of model utilized of the relapse
model in clarifying the examination. Retaining expense clarified 14.4% of variety in remote
trade
R 0.120
R Square 0.144
The study conducted a linear regression to ascertain the influence of withholding tax on the
EPZ firm‘s performance. The performance of firms was measured by the foreign exchange
35
Table 4. 22 Effects of withholding tax on foreign exchange

(Constant) -3.454 0.381 -9.055 0.000
Log custom 0.295 0.022 0.49 13.378 0.000
duty
Results uncovered that retaining impetus was emphatically and essentially related with length
of remain (r=0.295, p=0.000). The negative steady estimation of - 3.454 demonstrates that
without retention, holding different elements consistent, the length of remain of firms will
diminish after some time.
Y = - 3.454+ 0.295X
Y=Ln (remote trade (EPZ Performance)
X=Ln (retaining charge)
From the discoveries, the investigation dismissed the invalid speculation that retaining charge
motivator has no noteworthy association with execution of EPZ firms in Kenya. This is on
the grounds that the likelihood esteem (p-esteem = 0.000) was not exactly the ordinarily
estimation of 0.05. Thusly, the investigation presumed that retaining assessment has a
positive association with the exhibition of EPZ firms as estimated utilizing remote trade.
4.4.3 Duty Exemption for primary data

Table 4. 23 Effect of duty exemption on performance of EPZ Firms in Kenya.

Yes 35 78
No 10 22
Total 45 100
36
22%
78%
Figure 4. 7 Effect of duty exemption on performance of EPZ Firms in Kenya.

Table 4.23 and figure 4.8 above shows the analysis of duty exemption on performance of
EPZ Firms in Kenya. Based on the analysis, 78% of the total respondents indicated that duty
exemption affects performance of EPZ Firms in Kenya while 22% stated that duty exemption
has no effect on performance of EPZ Firms in Kenya.
Table 4. 24 Effect of duty exemption on performance of EPZ Firms in Kenya.

No 5 11
Low 6 13
Moderate 8 18
High 14 31
Very high 12 27
Total 45 100
40%
31%
27%
20% 11% 13% 18%
0%
No Effect
Low Effect
Moderate
High Effect
Effect Very High
Effect
Figure 4. 8 Effect of duty exemption on performance of EPZ Firms in Kenya.

Table 4.24 and figure 4.9 above indicates how the respondents rated effects duty exemption
on performance of EPZ Firms in Kenya. Based on the analysis, 27% of the respondents rated
37
the effects as very high, 31% of the respondents rated the effect as high, 18% of the
respondents rated it as moderate, 13% of the respondents rated the effects as Low while the
rest of the respondents 11 % rated as no effects.
4.4.3.1 Duty Exemption for secondary data

Assessment of duty exemption incentives waived for EPZ firms in Kenya revealed that a
cumulative total of 130 firms benefited from this duty exemption for the period between2011
and 2017. The study revealed EPZ firms were relieved of import duty between Kshs
16,914,764 and Kshs 38,431,210.
Table 4. 25 Description of Duty Exemption Statement from secondary Data
Year N Mean (Millions) Std. Deviation

2011 15 35,643,685 51,753,967
2012 20 28,348,606 93,582,750
2013 26 38,431,210 49,226,251
2014 18 32,585,044 80,675,110
2015 22 27,269,985 53,551,485
2016 16 23,947,562 49,226,251
2017 13 16,914,770 45,141,931
Total 130 29,020,123 65656708
4.4.3.2 Effects of Duty exemption on the Number of jobs
The results presented in table 4.18 present the fitness of model used of the regression model
in explaining the study phenomena. Import duty incentives explained 18.9% of variation in
Number of jobs.
R 0.170
R Square 0.189
38
The examination directed a straight relapse to learn the impact of extract obligation
motivating force on the EPZ association's presentation. The exhibition of firms was estimated
by the all out number of laborers.
H0: There is no noteworthy connection between obligation exception and execution of EPZ
firms in Kenya.
Y = - 6.878+ 0.701 X
Y=Ln (Number of occupations (EPZ Performance))
X=Ln (obligation exclusion Incentive)
From the discoveries, the examination dismissed the invalid theory that obligation exception
has no critical association with execution of EPZ firms in Kenya. This is on the grounds that
the likelihood esteem (p-esteem = 0.000) was not exactly the traditionally estimation of 0.05.
In this manner, the examination reasoned that extract obligation motivation has a positive
association with the exhibition of EPZ firms as estimated utilizing the all out number of
laborers in Kenya.
Table 4. 27Effects of Duty Exemption on the Number of jobs
B Std. Error Beta t Sig.
(Constant) -6.878 0.508 -13.536 0.000

Log 0.701 0.031 0.6 22.305 0.000
Duty exemption
4.4.3.3 Effects of Duty Exemption Incentive on technology

The results presented in table below present the fitness of model used of the regression model
in explaining the study phenomena. Import duty exemption explained 42.3% of technology
transfer.
R 0.65
R Square 0.423
39
This study sought to investigate the influence of duty exemption incentive given to EPZ firms
on the performance of the firms. The findings are shown in Table below.
Table 4. 29 Effects of duty exemption on technology

Constant -5.452 3.891 0.000
Log Excise duty 0.931 0.732 0.148 9.671 0.000
Incentive
H0: There is no huge connection between obligation exclusion Incentive and execution of
EPZ firms in Kenya.
Y = - 5.452+ 0.931 X
Y=Ln (innovation (EPZ Performance))
X=Ln (obligation exception Incentive)
From the discoveries, the investigation dismissed the invalid theory that obligation exclusion
Tax Incentives has no critical association with execution of EPZ firms in Kenya. The
likelihood esteem (p-esteem = 0.000) was not exactly the regular estimation of 0.05. In this
way, the examination reasons that Excise charge Incentives has a positive association with
the presentation of EPZ firms in Kenya.
4.4.3.4 Effects of Duty Exemption Incentive on Foreign Exchange
in explaining the study phenomena. Excise duty incentives explained 16.9% of foreign
exchange.
R 0.130
R Square 0.169
40
The study conducted a linear regression to ascertain the influence of duty exemption
incentive on the EPZ firm‘s performance. The performance of firms was measured by foreign
exchange.
Table 4. 31 Effects of Duty Incentive on foreign exchange

(Constant) -3.457 0.44 -7.865 0.000
Log excise duty 0.304 0.026 0.421 11.472 0.000
Incentive
H0: There is no significant relationship between duty exemption Incentive and performance
Y = -3.457+ 0.304X
X=Ln (duty exemption tax)
Y =Ln (foreign exchange (EPZ Performance))
From the findings, the study rejected the null hypothesis that duty exemption incentive has no
significant relationship with performance of EPZ firms in Kenya. This is because the
probability value (p-value = 0.000) was less than the conventionally value of 0.05. Therefore,
the study concluded that excise duty incentive has a positive relationship with the
performance of EPZ firms as measured using the number of years in operation
4.4.4 Capital Allowance Tax for primary data
Table 4. 32 Effect of capital allowance tax on performance of EPZ Firms in Kenya.

Yes 40 89
No 5 11
Total 45 100
41
11%
89%
Figure 4. 9 Effect of capital allowance tax on performance of EPZ Firms in Kenya.
Table 4.31 and figure 4.10 above shows the analysis of the effect of capital allowance tax on
performance of EPZ Firms in Kenya. Based on the analysis, 89% of the total respondents
indicated that capital allowance tax affects performance of EPZ Firms in Kenya. While 11%
of the respondents stated that capital allowance tax has an effect on tax incentives on
performance of EPZ Firms in Kenya.
Table 4. 33 Effect of capital allowance tax on performance of EPZ Firms in Kenya.

No 5 12
Low 6 13
Moderate 9 20
High 15 33
Very High 10 22
Total 45 100
42
35%
33%
30%
25%
20% 20% 22%
15% 12% 13%

10%
5%
0%
No Effect
Low Effect
Moderate
Effect High Effect
Very High
Effect
Figure 4. 11 Effect of capital stipend charge on execution of EPZ Firms in Kenya.

Table 4.32 and figure 4.11 above demonstrate how the respondents appraised impacts of
capital recompense charge on duty motivating forces on execution of EPZ Firms in Kenya. In
view of the examination, 22% of the respondents appraised the impacts of open connection
officials as exceptionally high, 33% of the respondents evaluated the impact as high, 20% of
the respondents appraised it as moderate, 13% of the respondent evaluated the impacts as low
while 12 % of the respondents evaluated as no impacts.
4.4.4.1 Capital Allowance Tax for auxiliary information
The examination broke down the optional information on capital recompense charge
motivations given to EPZ firms for the time of 2011 to 2017 gathered from EPZA. The
unmistakable insights of the information uncovered that the all out combined number of EPZ
firms that profited by capital stipend charge motivating force somewhere in the range of 2011
and 2017 were 150. The outcomes likewise uncovered that the most noteworthy capital
recompense impetus was given in 2010 while the least was given in 2007. The methods and
standard deviation for the period from 2003 to 2014 are appeared in Table underneath:
43
Table 4. 34 Descriptive of Capital Allowance Tax Incentive for EPZ firms
Year N Mean (Million) Std. Deviation
2011 25 6,122,338 16,618,672

2012 30 4,654,335 9,666,155
2013 24 4,310,442 9,086,340
2014 21 3,968,622 9,439,480
2015 20 2,595,046 4,274,967
2016 18 7,527,464 21,878,425
2017 12 9,498,141 42,985,676
Total 150 5,525,198 17,522,076
The study conducted a linear regression to ascertain the influence of capital allowance
number of total workers.
Table 4. 35Effects of Capital Allowance Incentive on the Number of jobs
(Constant) 2.526 0.624 4.046 0.000
Log capital 0.208 0.045 0.248 4.6 0.000

allowance incentive
H0: There is no huge connection between Capital remittance motivating force and
execution of EPZ firms in Kenya.
Y = 2.526+ 0.208 X
Y=Ln (Number of employments (EPZ Performance)
X=Ln (Capital recompense Incentive)
From the discoveries, the investigation dismissed the invalid theory that capital recompense
motivator has no critical association with execution of EPZ firms in Kenya. This is on the
grounds that the likelihood esteem (p-esteem = 0.000) was not exactly the traditionally
44
estimation of 0.05. Along these lines, the investigation reasoned that capital stipend motivator
has a positive association with the exhibition of EPZ firms as estimated utilizing the quantity
of complete specialists made in Kenya.
4.4.4.2 Effects of Capital Allowance Incentive on Technology
in explaining the study phenomena. Capital allowance incentives explained 33.6% of
technology
Table 4. 36 Effects of Capital Allowance Incentive on technology
Constant -5.423 6.345 0.023
Log Capital 0.893 2.891 0.123 3.281 0.002

Allowance
H0: There is no statistical significant relationship between Capital allowances Incentive

and the performance of EPZ firms in Kenya.
Y = -5.423+ 0.893 X
Y=Ln (Technology (EPZ Performance)
X=Ln (Capital allowance Incentive)
From the findings, the study rejected the null hypothesis that Capital allowance incentive has
no significant relationship with the performance of EPZ firms in Kenya. This is because the
probability value (p-value = 0.002) was less than the conventionally value of 0.05. Therefore,
the study concludes that capital allowance incentive has a positive relationship with the
performance of EPZ firms in Kenya.
4.4.4.3 Effects of Capital Allowance Incentive on foreign exchange

in explaining the study phenomena. Capital allowance incentives explained 14% of foreign
exchange.
45
R 0.380
R Square 0.144
The study conducted a linear regression to ascertain the influence of capital allowance
incentive on the EPZ firm‘s performance. The performance of firms was measured by foreign
exchange
Table 4. 38 Effects of Capital Allowance Incentive on foreign exchange

Constant -0.304 0.534 -0.569 0.570
Log capital 0.154 0.038 0.241 4.021 0.000
allowance incentive
H0: There is no huge connection between Capital remittance motivating force and execution
Y = - 0.304+ 0.154X
Y=Ln (outside trade (EPZ Performance))
X=Ln (Capital remittance Incentive)
From the discoveries, the examination dismissed the invalid theory that capital stipend
motivator has no huge association with execution of EPZ firms in Kenya. Since the
likelihood esteem (p-esteem = 0.000) was not exactly the customarily estimation of 0.05. The
examination presumed that capital recompense motivator has a positive association with the
presentation of EPZ firms as estimated utilizing the remote trade income.
4.5 Summary of Data Analysis
4.5.1 General Information
The individuals who effectively filled and finished the polls to the required fulfillment of the
exploration were 45 which contained 65% of the all out respondents while 24 respondents
speaking to 35% did not take part successfully. 15 respondents with a Degree level of training
speaking to 33%, 10 respondents arrived at school speaking to 22%, 8 respondents arrived at
46
auxiliary level speaking to 18% while the other 7 respondents arrived at post graduate level
speaking to 16% and respondents who arrived at doctorate level were 5 speaking to 11%. The
respondents who had working background of under multi year spoke to 22%, 20 respondents
had worked between 3-5 years speaking to 45%, 15 respondents had worked over 5 years
speaking to 33% while the other At EPZ Athi River, 2 of the respondents met were from top
administration level speaking to 4%, 5 respondents were from the center level administration
speaking to 12% and 38 respondents were from the care staff speaking to 84% of the
reactions.
4.5.2 Corporate Income Tax
89% of the respondents showed that corporate personal duty affects execution of EPZ Firms
in Kenya.while the staying 11% of the respondents demonstrated that corporate annual
assessment has no impact on execution of EPZ Firms in Kenya.
4.5.3 Withholding Tax
84% of the all out respondents showed that retaining duty affects execution of EPZ Firms in
Kenya. While 16% of the respondents expressed that retaining assessment has no impact on
execution of EPZ Firms in Kenya
4.5.4 Duty Exemption
A larger part respondent speaking to 78% showed that obligation exclusion affects execution
of EPZ Firms in Kenya. While the staying 22% of the respondents demonstrated that
obligation exception has no impact on execution of EPZ Firms in Kenya.
4.5.5 Capital Allowance Tax

Countless respondents speaking to 89% of the complete respondents showed that capital
recompense duty affects execution of EPZ Firms in Kenya. While 11% of the respondents
expressed that capital remittance duty has no impact on execution of EPZ Firms in Kenya
47
CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMENDATIONS

5.1 Introduction
The chapter presents the discussion of the findings already presented in previous chapter.
Under the discussion, the findings are compared with that of other studies. From the
clarifications, suggestions and associations, the conclusions and the recommendations are
gathered. The presentation of this section is per the four study objectives. This section makes
room for areas of other studies purely based on the limitations as well as the results of this
study.
5.2 Summary of Findings
This general target of the examination was to explore the impact of expense motivating forces
on the presentation of EPZ firms in Kenya. The particular destinations were to research the
impact that corporate annual expense motivator, retaining charge, obligation exclusion duty,
and capital recompense assessment has on execution of EPZ firms. The following is the
outline of the discoveries of the examination.
5.2.1 Corporate personal assessment

Corporate personal assessment occasion motivating force has a constructive association with
outside direct speculations as it prods both nearby and remote venture which constructive
effects the exhibition of an EPZ firms. So as to great execution in EPZ association's corporate
annual duty ought to be placed into thought. The discoveries showed the degree to which
capital recompense assessment influences execution of EPZ Firms in Kenya as, 22% of the
respondents said the degree is high, 33% of the respondents demonstrated to a high degree,
20% of the respondents demonstrated on a moderate degree, 13% of the respondent
demonstrated low degree while the staying 12% of the respondents said there was no impact.
5.2.2 Withholding Tax

Poor business condition couldn't be repaid by either retaining expense motivating forces or
different types of duty endowments from the legislature. Giving duty impetuses with a poor
infrastructural improvement, disintegration of assessment base was no doubt and hence,
relatively few speculations would be attracted to the economy.The examination showed that
most of the respondents appraised the impact of retention expense occasion on duty
motivating forces on execution of EPZ Firms in Kenya as; 27% of the respondents
48
demonstrated to an exceptionally high, 38% of the respondents said the degree is high, 20%
of the respondents showed on a moderate degree, 11% of the respondent showed low degree
while the remaining 4% of the respondents said there was no impact.
5.2.3 Duty Exemption

Obligation exceptions influence execution of EPZ firms according to the examination
discoveries where larger part of the respondents were in concurrence with explanations on
obligation exclusion and execution of EPZ firms. The relationship results uncovered that
obligation exclusion had a positive and critical relationship with execution of EPZ. From the
discoveries, the degree at which obligation exclusion influences execution of EPZ Firms in
Kenya as demonstrated by the respondents were; 27% of the respondents evaluated the
impacts as high, 31% of the respondents appraised the impact as high, 18% of the
respondents appraised it as moderate, 13% of the respondents evaluated as low degree while
the remainder of the respondents 12 % appraised as no impacts.
5.2.4 Capital Allowance Tax

Results uncovered that capital remittance had a positive and critical impact on the exhibition
of EPZ firms in Kenya. These outcomes demonstrate that an improvement in capital
remittance motivation prompts an improvement in the exhibition of the organizations
working in the fare handling zone as estimated by execution, length of remain and absolute
number of occupations made. Conscious endeavors ought to along these lines be made by
organizations and financial specialists working in EPZs to concentrate on exploiting this
assessment motivating force. Examination demonstrated that 22% of the respondents showed
the impacts of capital remittance charge as extremely high, 33% of the respondents appraised
the impact as high, 20% of the respondents evaluated it as moderate, 13% of the respondent
as low degree while 12 % of the respondents appraised that there was no impact.
5.3 Conclusions
This present examination's goal was to survey the impact of expense motivators on execution
of EPZ firms in Kenya. The connection results uncovered that expense motivating forces had
a positive and critical impact on execution of EPZ firms in. These discoveries infer that
assessment motivators significantly affect execution of firms working in the fare handling
zones in Kenya. An improvement in the examined expense motivating forces prompts an
improvement in both the benefits of the organizations, the quantity of individuals utilized just
49
as the length of remain of these organizations. This in this way proposes a need to survey
these motivating forces by the legislature and include more center it. The discoveries of this
investigation have been thought about by the discoveries of past examinations on a similar
topic both all around, provincially and locally.
Poor business condition couldn't be repaid by either retaining duty motivators or different
types of expense appropriations from the legislature. Giving expense motivating forces with a
poor infrastructural improvement, disintegration of assessment base was in all probability and
in this manner, very few speculations would be attracted to the economy.
The graphic outcomes demonstrate that obligation exclusions do impact execution of EPZ
firms where bigger piece of the respondents were in simultaneousness with clarifications on
extract charge motivator and execution of EPZ firms. Nonetheless, the relationship results
demonstrated that expense. Special case had a positive and critical association with execution
of EPZ. The other goal was to examine was to choose how capital recompense evaluation
impacts execution of EPZ firms in Kenya. The connection results found that capital
remittance had a positive and colossal effect on the introduction of EPZ firms in Kenya
these outcomes show that an improvement in capital stipend impetus prompts an
improvement in the exhibition of the organizations working in the fare preparing zone as
estimated by execution, length of remain and all out number of occupations made. Conscious
endeavors ought to thusly be made by organizations and financial specialists working in
EPZs to concentrate on exploiting this expense motivating force. The discoveries of the
examination have been looked at.
5.4 Recommendations
This examination suggests that partners in assessment arrangement ought to re-examine the
monetary estimation of corporate duty motivator. These impetuses had the ability to build the
productivity of EPZ firms just as the quantity of occupations. Thusly, the legislature should
offer more CIT occasions and decreased assessment rates so as to expand the degree of
remote ventures and work in the nation. Decrease would profit EPZ firms who had so far
profited by assessment occasions and diminished expense rates which went about as drivers
for development, efficiency and expanded ventures by the organizations. Such a measure
expanded venture through a diminishing in the client cost of capital. This clarified the
50
positive efficiency impacts of decreased corporate personal assessment rates through new
capital products epitomized mechanical change.
The investigation further suggests the legislature ought to modify the corporate personal duty
downwards. The decreased corporate assessment could realize an expansion in the interest for
work and because of this expansion there will be an expansion in the wages that will likewise
achieve an improvement in the utilization levels in the economy. There will be a decrease in
the motivating forces in order to move the benefits out because of a diminished corporate
assessment and in the process this will secure the Corporate Tax base. Also, there will be an
expansion in the degrees of venture because of the diminished corporate assessment in the
nation. Regardless of this decrease in the corporate assessment, the administration ought to
likewise devise extra help for the organizations and different companies so as to pad them
from the surprising expense of the corporate duty that will obstruct speculation and along
these lines lead to a deceleration in the pace of development in the economy.
In view of the discoveries, the examination suggested that the administration ought to depend
more on aberrant expenses, for example, extract obligation and import charges as opposed to
VAT or annual duty. This is on the grounds that import and extract expenses were flexible
and created income with constrained managerial expenses. They were likewise less bothering
to the citizens since they were covered up in the costs of the product being executed, and
consequently their expansion may not really prompt compression popular of the focused on
items. It could be utilized as a procedure for expanding work in the nation.
As to firms working in the Export Processing zones in Kenya, in the light of the logical
disclosures of the investigation, the examination prescribes that it is basic for bookkeeping
and money officials in assembling firms working in the fare preparing zones in Kenya to
expertly identify and profile their interests in qualifying modern resources as per surviving
duty controls so as to profit by capital recompense awards. The engaging quality of money
related economies of capital recompense in any case, producing segment financial specialists
should practice limitation and maintain a strategic distance from unpredictable mechanical
resource demand and development. Affectability to innovative, administrative and social
elements was likewise basic so the enthralling aims of capital recompense would not wind up
encouraging executing substance in the Kenyan economy.
51
5.5 Suggestion for Further Research
The assessment recommends that future examinations ought to plan to enlarge the purposes
behind low execution of EPZ firms in Kenya not perceived in this examination. The
assessment similarly suggests that an examination on the answers for the low execution of
EPZ firms be coordinated. This would help with improving EPZ firms in Kenya and to enable
more examiners. This assessment used firm size as a coordinating variable on the association
between cost inspirations and the presentation of EPZ firms in Kenya. All things considered,
change standard may affect execution of EPZ firms, along these lines, for further
examinations, the assessment endorse the usage of swapping scale as a coordinating variable
on the association between appraisal driving forces and the introduction of EPZ firms in
Kenya.
52
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55
Appendix I: Questionnaire
This questionnaire has statements regarding the effect that tax incentives have on Export
Processing Zones (EPZs) in Kenya. Kindly spare a few minutes to complete the questionnaire
according to the guidelines. The responses given will be confidential and handled with the
greatest standard of ethics.
Thank you for agreeing to participate in this academic study.
SECTION A: GENERAL /DEMOGRAPHIC DATA
1. Please indicate your highest level of education
a) Secondary level ( )
b) College level ( )
c) Degree level ( )
d) Post graduate level ( )
e) Doctorate level ( )
f) Others (specify)
Explain………………………………………………………………………………………
………………………………………………………………………………………………
……………………………………………………………………………………………...
2. How many years have you worked in the export processing zones (EPZs)?
a) Less than 2 years ( )
b) 3 to 5 years ( )
c) Over 5 years ( )
3. Kindly indicate your position in the company
a) Finance Manager ( )
b) Administrative Director ( )
c) Human Resource Director ( )
d) Tax Director ( )
e) Others (specify)
Explain…………………………………………………………………………………………
…………………………………………………………………………………………………
…………………………………………………………………………………………………
SECTION B: CORPORATE INCOME TAX
4. How do you rate the effect of corporate income tax on tax incentives on the performance of
EPZ firms in Kenya?
Yes ( ) No ( )
Explain…………………………………………………………………………………...……
…………………………………………………………………………………………..............
......................................................................................................................................
5. How does corporate income tax affects tax incentives on the performance of EPZ firms in
Kenya?
No Extent ( )
Low Extent ( )
Moderate Extent ( )
High Extent ( )
Very high Extent ( )
SECTION C: WITHHOLDING TAX
6. Does withholding tax affect tax incentives on the performance of EPZ firms in Kenya?
Yes ( ) No ( )
Explain…………………………………………………...……………………………………
…………………………………………………………………………………………………
…………………………………………………………………………………………
7. To what extent does withholding tax affect tax incentives on the performance of EPZ firms
in Kenya?
No Extent ( )
Low Extent ( )
Moderate Extent ( )
High Extent ( )
57
SECTION D: DUTY EXEMPTION
8. Does duty exemption affect tax incentives on the performance of EPZ firms in Kenya?
Yes ( ) No ( )
Explain…………………………………………………...……………………………………
…………………………………………………………………………………………………
…………………………………………………………………………………………
9. To what extent does duty exemption affect tax incentives on the performance of EPZ firms
in Kenya?
No Extent ( )
Low Extent ( )
Moderate Extent ( )
High Extent ( )
SECTION E: CAPITAL ALLOWANCE TAX

10. What is the effect of capital allowance tax on tax incentives on the performance of EPZ
firms in Kenya?
Yes ( ) No ( )
Explain…………………………………………………...……………………………………
…………………………………………………………………………………………………
…………………………………………………………………………………………………
11. How does capital allowance tax on tax incentives on the performance of EPZ firms in
Kenya?
No Extent ( )
Low Extent ( )
Moderate Extent ( )
High Extent ( )
58
Appendix II: Secondary Data Collection Sheet
Section A: Performance and Tax Incentives of EPZ Firms in Kenya
Please indicate the performance of the firm as observed in the annual reports and
financial information. Also indicate tax incentives the firm received in the table below.
Capital Allowance Tax Incentives
Year (s) 2011 2012 2013 2014 2015 2016 2017
Below 5m
5m-20m
21m-40m
41m-60m
Over 60m
Corporate Income Tax Incentives
Year (s) 2011 2012 2013 2014 2015 2016 2017
Below 5m
5m-20m
21m-40m
41m-60m
Over 60m
59
Withholding Tax Holiday Incentive
Year (s) 2011 2012 2013 2014 2015 2016 2017
Below 5m
5m-20m
21m-40m
41m-60m
Over 60m
Duty Exemption
Year (s) 2011 2012 2013 2014 2015 2016 2017
Below 5m
5m-20m
21m-40m
41m-60m
Over 60m
60

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EFFECTS OF TAX INCENTIVES ON THE PERFORMANCE OF EXPORT

PROCESSING ZONE FIRMS IN KENYA; A CASE OF ATHI RIVER

PAUL JANE BETTY

A RESEARCH PROJECT SUBMITTED TO THE DEPARTMENT OF ECONOMICS,

Paul Jane Betty

Reg. Number: HDB335-C016-1517/2017

Table 4. 1Response Rate ....................................................................................................................... 22

EPZ Export Processing Zones

EPZA Export Processing Zones Authority

FDI Foreign Direct Investment

KNBS Kenya National Bureau of Statistics

KRA Kenya Revenue Authority

OECD Organization for Economic Co-operation and Development

SMEs Small and Medium-Sized Enterprises

CITI Corporate Income Tax Incentive

CAI Capital Allowance Incentive

IDE Import Duty Exemption

WTH Withholding Tax Holiday

UNCTAD United Nations Conference on Trade and Development

MENA Middle East and Northern Africa

OLS Ordinary Least Squares

FGLS Feasible Generalized Least Squares

ROI Returns on Investment

Duty exemptions: alludes to exclusion or a decrease of a tax or expense on the

Performance: alludes to the real yield or consequences of an

1.1.1 Tax Incentives

1.1.3 The Relationship between Tax Incentives and Performance

1.2 Statement of the Problem

1.3.1 General Objective

1.4 Research Questions

1.6 Scope of the Study

1.7 Limitations of the Study

2.2 Theoretical Literature Review

2.2.1 Cluster Approach Theory

2.2.2 Normative Theory

2.2.3 The Agency Theory of Tax Incentives

2.3 Conceptual Framework

Corporate Income Tax Holiday

Withholding Tax Holiday

Skill and technology

Capital Allowance Tax

Figure 2. 1 Conceptual Framework

2.4 Measurements of Performance

2.5.1 Types of Tax Incentives

2.5.1.1 Corporate Income Tax Holiday

2.5.1.2 Withholding Tax Holiday

2.5.1.3 Duty Exemptions

2.5.1.4 Capital Allowance Tax

2.6 Critique of Existing Literature

2.7 Summary of Literature Reviewed

Table 3. 1 Target Population

Top Level Management 5

Middle Level Management 10

3.4 Data Collection Methods

3.5 Sample and Sampling Frame

Category Frequency Sample Size Percentage

Top Level Management 5 3 4

Middle Level Management 10 7 10

Total 105 69 100

3.6 Questionnaire Design

3.7 Data Processing and Analysis

3.7.1 Model Specification

Yit= α + β Xit + εit ………………………………………………………… (3.1)