Tax Subsidies and Performance of Micro and Small Enterprises in the Manufacturing Sector in Mombasa County, Kenya

Abstract

Micro and Small Enterprises (MSEs) segment has been recognized worldwide for its role in wealth generation, employment establishment, and poverty reduction. Nevertheless, there is an increasing inability of Small-Scale enterprises access to government support, which leads to failure to meet expected achievements as the engine for economic growth and development despite government encouragement in this direction. As a result, the aim of this research was to determine theiimpactiofigovernmentiinitiativesionitheiperformanceiofimicro and small businesses in Mombasa County, Kenya. In this study, the specific objectives were to determine how tax subsidies affected the performance of micro and small manufacturers in Mombasa County, Kenya. This study adopted agency theory. Descriptive research design was used in this study. The study primarily focused on micro and small businesses in the manufacturing sector in Mombasa County, Kenya, and since the target population was insufficient to draw a statistical sample, a census was used to establish an appropriate sample size based on the target population. Several open-ended questions and a modified Likert scale questionnaire were used. To refine the instrument, a feasibility study was conducted. Cronbach's alpha was used to assess the quality and reliability of the study. Statistical Package for Social Science (SPSS Version 25) for Windows was used to analyze data. The analyses were carried out with the help of frequency counts, percentages, means, standard deviations, regressions, and correlations, and the results were presented as graphs, charts, and tables. From the findings, the study concludes that the tax reforms and tax behaviours significantly affect tax compliance of the MSEs in Mombasa County. The study recommends that: continuous emphasis on creation of awareness and monitoring of the compliance of the MSEs. Review the tax laws and more enforcement of the MSEs tax laws. Kenya Revenue Authority should carry out more profiling of the MSEs and research more on the MSEs to understand the MSEs. Publicize prosecution non-compliance; provide incentives for compliance and opportunity to voluntarily disclose before the application of penalties. There is need for the government to enhance MSEs’ trust with the tax reforms for voluntary compliance.