Tax Incentives and Growth of Small and Medium Sized Enterprises in Nairobi County
DOI:
https://doi.org/10.53819/81018102t2124Abstract
In a low income country such as Kenya, the role of SMEs is crucial in pushing the country’s social economic development agenda. SMEs are highly perceived to be the accelerators of growth and innovation in the economy. However, SMEs face challenges with regard to financing, disproportionate regulatory burdens and competition failures compared to large entities. An attractive business environment is therefore important to minimize the impact of these obstacles and provide a level playing ground for firms of all sizes. Reduction of the tax burden for SMEs through issuing incentives frees up funds to be used in innovation and efforts to access global markets which ultimately steer business growth. The study’s objective was to determine the effect of tax incentives on growth of SMEs in Nairobi City County Kenya. This study was guided by the normative theory and the political systems theory. The research employed the descriptive research design. The collected data was edited and coded and fed into the SPSS computer package to generate both inferential and descriptive statistics. The inferential statistics was undertaken by performing two regressions on each of the independent variable against growth. The study found p values of 0.000 at 95% level of confidence on the association between each of the independent variables (tax exemptions and investment allowances) on growth of SMEs in Nairobi, County. This shows that the model adopted for this study was significant and that tax incentives affect the growth of SMEs. From the data analysis, it was concluded there are various tax incentives that have been formulated to accelerate the growth of SMEs in Kenya although their practical implementation has not been fully realized. The study recommends that the development of policies by Kenyan government geared to accelerate the growth of SMEs should have the target beneficiaries input before implementation to prevent the formulation of impractical and undesirable policies. The government should also provide frequent trainings to SMES on the available incentives which they could leverage on to boost their growth
Key words: Firm growth, investment allowances, tax exemptions
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