1.2 incentives and investments and their results have beendifferent

 

1.2 Research Problem

The government of Kenya
has continued offering tax incentives to various sectors of theeconomy despite
slow growth in GDP within the last four years. Lack of evaluation on the
performance in relation to contribution to development has resulted to major
loss of income which could have otherwise been used in social welfare of Kenyan
citizens. This study is focused on establishing whether reforming tax
incentives structure in Kenya would aid in exploiting the full potential of the
key economic sectors.

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Studies have been done
on tax incentives and investments and their results have beendifferent
depending on the countries where they have been carried out and methodology adopted. A study conducted by Musyoka (2012), determining
the relationship between tax incentives and foreign direct investment in Kenya.
It was concluded that there was no significant improvement in foreign direct
investment as a result of implementing tax incentives in Kenya.A study by
Haiyambo (2013) investigated tax incentives and foreign direct investment; the
Namibian experience. The study reviewed the FDI inflows into Namibia by
assessing the benefits and costs through an investigation of related indicators
and making inferences. The results showed that tax incentives offered as well
as other factors might have played a complimentary role in the investment
environment of country. Gathaiga (2013) looked at the impact of tax incentives
on FDI inflows of listed firms at the NSE and the results revealed that there
was strong relationship between wear and tear allowances and FDI inflows. But
investment in securities is different from EPZ industries. Wanjiku (2016) also
looked at the impact of FDI generally on the economic growth in Kenya but there
were still gaps in the EPZ industries. Thisstudy therefore aims at
investigating the tax incentives and foreign direct investments in Kenya, with
EPZs in Mombasa serving as a case study.