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Relationship between increased Taxation and Financial Performance of Kenyan Firms

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  • Catherine Elsa Aringo

    (African Journal of Commercial Studies)

Abstract

Taxation plays a critical role in financing government activities, public services, and economic development. This study focuses on examining how taxation impacts the financial performance of firms in Kenya. The complex interplay between tax policies and financial outcomes is multifaceted, and understanding these dynamics is crucial for effective tax strategies and financial optimization. The theoretical frameworks of "Ability to Pay Theory," "Classical Taxation Theory," and "Political Power Theory" are explored to provide insight into the relationships between taxation and business performance. These theories help us understand how tax rates, incentives, and political influences can affect firms' profitability, investment, and overall financial performance. By reviewing existing literature and conducting empirical research, this study aims to shed light on the specific challenges and opportunities that taxation presents to businesses in Kenya. The study observed that the influence of taxation on the financial performance of Kenyan firms is significant and multifaceted. Understanding the effects of customs duty, PAYE, and VAT is crucial for informed decision-making and effective management of financial resources in the business environment. Further research should explore the specifics of these impacts and potential mitigating measures.

Suggested Citation

  • Catherine Elsa Aringo, 2023. "Relationship between increased Taxation and Financial Performance of Kenyan Firms," African Journal of Commercial Studies, African Journal of Commercial Studies, vol. 3(3).
    • Handle: RePEc:cwk:ajocsk:2023-15
    DOI: 10.59413/ajocs/v3.i3.2
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    References listed on IDEAS

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    5. GANDOMAN HEIDARI Shaho & SOLDATOS Gerasimos, 2018. "The Challenges Of Corporate Taxation In Iran: The Case Of Construction Companies In The Province Of Kurdistan," Studies in Business and Economics, Lucian Blaga University of Sibiu, Faculty of Economic Sciences, vol. 13(1), pages 58-66, December.
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    8. de Mooij, Ruud A & Ederveen, Sjef, 2003. "Taxation and Foreign Direct Investment: A Synthesis of Empirical Research," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 10(6), pages 673-693, November.
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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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