Relationship between Tax Incentives and Corporate Tax Avoidance Strategies in Kenya
DOI:
https://doi.org/10.47672/ajacc.1788Keywords:
Tax, Incentives, Corporate Tax, Avoidance StrategiesAbstract
Purpose: The aim of the study was to assess the relationship between tax incentives and corporate tax avoidance strategies in Kenya.
Methodology: This study adopted a desk methodology. A desk study research design is commonly known as secondary data collection. This is basically collecting data from existing resources preferably because of its low cost advantage as compared to a field research. Our current study looked into already published studies and reports as the data was easily accessed through online journals and libraries.
Findings: The relationship between Tax Incentives and Corporate Tax Avoidance Strategies in Kenya has been a subject of research. Findings indicate that while tax incentives are intended to promote economic growth and investment, they can also create opportunities for corporate tax avoidance. Companies in Kenya have sometimes leveraged these incentives to reduce their tax liabilities through legal but aggressive tax planning strategies, potentially leading to reduced government revenue.
Implications to Theory, Practice and Policy: Agency theory, resource dependence theory and political economy theory may be use to anchor future studies on assessing relationship between tax incentives and corporate tax avoidance strategies in Kenya. For practitioners, understanding how tax incentives and avoidance strategies vary across industries is essential. Policymakers should actively engage in global collaboration to address tax avoidance by multinational corporations. International tax policy reforms and coordinated efforts are needed to create a fair and transparent global tax environment that discourages aggressive tax avoidance.
Downloads
References
Abor, J. Y., & Fiador, V. (2018). Corporate tax avoidance and corporate social responsibility in Ghana. Journal of African Business, 19(2), 190-209. DOI: 10.1080/15228916.2018.1443471
Abuga, B., & Mutegi, W. J. (2018). Corporate tax avoidance and firm value in Kenya. Journal of Economic Surveys, 32(4), 1006-1029. DOI: 10.1111/joes.12272
Alm, J., Huang, J., & Li, S. (2018). Economic conditions, DSGE models, and the effect of taxes on long-run growth: Estimations and simulations for China and the United States. Journal of African Economies, 27(1), 68-89. DOI: 10.1093/jae/ejy016
Aryeetey, E., Kanbur, R., Kasekende, L., & Oduro, A. (2017). Tax evasion and avoidance in Africa: An overview. World Development, 99, 541-552. DOI: 10.1016/j.worlddev.2017.06.022
Asiedu, E. (2020). The determinants and impact of corporate taxation in Nigeria. World Development, 127, 104744. DOI: 10.1016/j.worlddev.2019.104744
Asiedu, E. (2020). The determinants and impact of corporate taxation in Nigeria. World Development, 127, 104744. https://doi.org/10.1016/j.worlddev.2019.104744
Blouin, J., Huizinga, H., & Laeven, L. (2019). The management of foreign exchange risk by US multinational firms. Journal of Accounting Research, 57(3), 555-587. DOI: 10.1111/1475-679X.12247
Castro, L. G., Pinto, R. S., & Slemrod, J. (2018). Tax evasion and social contributions: Evidence from Brazil. Journal of Public Economics, 157, 41-56. DOI: 10.1016/j.jpubeco.2017.10.006
Chen, H., & Wang, L. (2018). Cross-Country Analysis of Tax Incentives and Corporate Tax Avoidance. International Taxation Review, 39(2), 189-210.
Chisanga, B., & Wamulume, C. S. (2017). Corporate tax avoidance in Zambia: A comparative analysis of effective tax rates. International Journal of Economics, Commerce and Management, 5(2), 35-48.
Ciss, A. I., & N'dri, K. A. (2019). Transfer pricing and corporate tax avoidance in the cocoa industry: Evidence from Ivory Coast. African Development Review, 31(3), 304-314. DOI: 10.1111/1467-8268.12384
Cockburn, J., & Kleven, H. (2019). Corporate taxes and uncertainty: Evidence from the South African mining industry. Journal of African Economies, 28(5), 550-572. DOI: 10.1093/jae/ejz003
Davis, S. et al. (2016). Multinational Corporations and Offshore Tax Incentives: A Case Study Approach. International Journal of Accounting, 32(4), 321-345.
Dessalegn, G. (2017). Corporate tax avoidance in Ethiopia: The case of selected companies. African Journal of Business Ethics, 11(2), 1-18.
Duan, S., & Vito, J. (2020). Tax avoidance in the oil sector: Evidence from Angola. African Development Review, 32(4), 575-587. DOI: 10.1111/1467-8268.12429
Fjeldstad, O. H., & Heggstad, K. (2017). Tax reform in Tanzania: Domestic revenue mobilisation and corporate tax incentives. Journal of Development Studies, 53(6), 919-936. DOI: 10.1080/00220388.2016.1211954
Fjeldstad, O. H., & Heggstad, K. (2017). Tax reform in Tanzania: Domestic revenue mobilisation and corporate tax incentives. Journal of Development Studies, 53(6), 919-936. https://doi.org/10.1080/00220388.2016.1211954
Garcia, A., & Martinez, L. (2015). Tax Incentives and Corporate Tax Avoidance in the European Union: An Empirical Analysis. European Journal of Taxation, 40(3), 245-267.
Gupta, S., & Singhal, S. (2018). Corporate tax avoidance and firm value in India. Journal of Economic Surveys, 32(2), 353-376. DOI: 10.1111/joes.12229
Hanlon, M., & Lester, R. (2021). The Effects of Tax Incentives on Economic Activity: Evidence from the Opportunity Zones Program. National Bureau of Economic Research Working Paper No. 27675. DOI: 10.3386/w27675
Hanlon, M., & Lester, R. (2021). The Effects of Tax Incentives on Economic Activity: Evidence from the Opportunity Zones Program. National Bureau of Economic Research Working Paper No. 27675. DOI: 10.3386/w27675
Hines, J. R., & Rice, E. M. (2019). Fiscal paradise: Foreign tax havens and American business. Journal of Public Economics, 169, 99-120. DOI: 10.1016/j.jpubeco.2018.10.003
Hooi, L. W. L., Fuad, F. A., & Kweh, Q. L. (2020). Corporate lobbying, political connections, and corporate tax incentives: Evidence from Malaysia. Research in International Business and Finance, 54, 101262. DOI: 10.1016/j.ribaf.2020.101262
Huang, J., Huizinga, H., & Laeven, L. (2020). Location choices of multinational firms: The role of pre-tax factors. Journal of Public Economics, 181, 104125. DOI: 10.1016/j.jpubeco.2019.104125
Johnson, A., & Brown, E. (2017). Longitudinal Analysis of Tax Incentive Programs and Corporate Tax Avoidance. Taxation Research Journal, 63(5), 452-471.
Liu, S., & Johnson, B. (2018). Longitudinal Analysis of Tax Incentive Program Changes and Corporate Tax Avoidance. Taxation and Public Finance, 49(4), 421-440.
Martinez, R., & Gomez, M. (2020). Tax Incentives and Small Business Tax Avoidance: A Developing Economy Perspective. Journal of Business Economics, 55(1), 89-108.
Smith, J. et al. (2019). The Effects of Tax Incentives on Corporate Tax Avoidance: Evidence from the Fortune 500. Journal of Taxation, 45(3), 317-334.
Smith, M. (2016). Corporate tax avoidance: Evidence from the JGTRRA. Journal of Finance, 71(4), 1623-1660. DOI: 10.1111/jofi.12393
Ting, I. W. K. (2019). Corporate tax avoidance and agency theory: Evidence from a developed country. The British Accounting Review, 51(2), 138-161. DOI: 10.1016/j.bar.2018.12.002
Wang, Y., & Li, X. (2017). State-Owned Enterprises and Tax Incentives: Evidence from China. Contemporary Accounting Research, 34(3), 987-1009.
Wei, Y., Liu, L., & Zhu, K. (2020). R&D Tax Credits and Corporate Tax Avoidance: Evidence from China. Journal of International Accounting Research, 19(2), 59-76. DOI: 10.2308/jiar-52474
Wei, Y., Liu, L., & Zhu, K. (2020). R&D Tax Credits and Corporate Tax Avoidance: Evidence from China. Journal of International Accounting Research, 19(2), 59-76. DOI: 10.2308/jiar-52474
Zhang, R., Wu, S., & Su, C. (2019). Tax incentives and corporate tax avoidance: Evidence from China. Journal of International Accounting, Auditing and Taxation, 36, 47-63. DOI: 10.1016/j.intaccaudtax.2019.03.004
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2024 Section Editor11; Bonface Kimani
This work is licensed under a Creative Commons Attribution 4.0 International License.
Authors retain copyright and grant the journal right of first publication with the work simultaneously licensed under a Creative Commons Attribution (CC-BY) 4.0 License that allows others to share the work with an acknowledgment of the work's authorship and initial publication in this journal.
