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Relationship between Income Tax and Profitability of the Hotel Sector in Kenya

Author

Listed:
  • Jackline Nkatha Gitonga

    (Technical University of Mombasa (TUM))

Abstract

Taxation is a global economic phenomenon of paramount importance, serving as a shared fiscal responsibility between citizens and governments. This comprehensive review explores the intricate relationship between income tax and profitability, focusing on corporate tax, Pay as You Earn (PAYE), withholding tax, and their impact on businesses, particularly star-rated hotels in Kenya. The theoretical frameworks of Tax Incidence Theory and Labor Market Theory provide valuable insights into understanding the complex interplay between taxation and profitability in the hospitality industry. Drawing from empirical literature, this review explores studies from Nigeria, Kenya, and Romania, shedding light on the complex relationship between income tax and profitability. It discusses how corporate tax rates, employee income taxes, and other tax-related factors can influence a company's financial performance. This study concludes that there is an intricate negative relationship between income tax and profitability in the context of Kenyan star-rated hotels, considering corporate tax, PAYE, and their implications. The study aims to contribute to effective tax policies that support the industry's sustainable growth in Kenya and potentially other similar industries globally.

Suggested Citation

  • Jackline Nkatha Gitonga, 2023. "Relationship between Income Tax and Profitability of the Hotel Sector in Kenya," African Journal of Commercial Studies, African Journal of Commercial Studies, vol. 3(2).
    • Handle: RePEc:cwk:ajocsk:2023-11
    DOI: 10.59413/ajocs/v3.i2.4
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    References listed on IDEAS

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    1. Olaoye Clement Olatunji & Alade Elizabeth Oluwatoyin, 2019. "Effect of Corporate Taxation on the Profitability of Firms in NIGERIA," Journal of Economics and Behavioral Studies, AMH International, vol. 11(1), pages 191-201.
    2. Innocent Augustine NWAORGU & Kingsley S. OYEKEZIE & Mary-Fidelis Chidoziem ABIAHU, 2020. "Effect Of Corporate Tax On Sustainable Financial Performance Of Listed Firms In Nigeria," Journal of Taxation and Economic Development, Chartered Institute of Taxation of Nigeria, vol. 19(1), pages 50-63.
    3. Roger H. Gordon & Joel Slemrod, 1998. "Are "Real" Responses to Taxes Simply Income Shifting Between Corporate and Personal Tax Bases?," NBER Working Papers 6576, National Bureau of Economic Research, Inc.
    4. George J. Borjas, 2019. "Immigration and Economic Growth," NBER Working Papers 25836, National Bureau of Economic Research, Inc.
    5. Burman, Leonard E & Randolph, William C, 1994. "Measuring Permanent Responses to Capital-Gains Tax Changes in Panel Data," American Economic Review, American Economic Association, vol. 84(4), pages 794-809, September.
    6. David Card & Ana Rute Cardoso & Joerg Heining & Patrick Kline, 2018. "Firms and Labor Market Inequality: Evidence and Some Theory," Journal of Labor Economics, University of Chicago Press, vol. 36(S1), pages 13-70.
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    Cited by:

    1. Anjela Kavetsa, 2025. "Corporate Tax Compliance on the Financial Performance of Manufacturing Companies in Kenya," African Journal of Commercial Studies, African Journal of Commercial Studies, vol. 6(2).

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