Abstract:
Better performance has been the objective of all commercial manufacturing firms across
the globe. However, these are not regularly realized due to high costs on taxes including
multiple and double taxation which result to poor performance of manufacturing firms,
mostly in developing economies. In order to manage the effects of taxes on the
profitability of firms and to improve their performance, various tax planning strategies
are engaged by the firms so as to reduce the impact of high tax burden. It is in this regard
that this study aimed at determining the effect of tax planning strategies on the
performance of manufacturing firms in Nairobi City Kenya. The study was guided by
the following specific objectives; to determine the effect of Income shifting, expense
deduction, Capital Intensity and firm restructuring on the performance of manufacturing
firms in Nairobi city, Kenya. The study was anchored on the following theories; The
Hoffman’s tax planning theory, trade off theory, stakeholder theory and benefit theory
of taxation. The study adopted explanatory research design. The target population of the
study was 469, registered manufacturing firms in Nairobi city Kenya. A sample of 216
manufacturing firms using stratified random sampling was employed. Quantitative;
primary data was collected using structured questionnaires. Reliability of the data
collection instrument was tested using Cronbach Alpha test. Data was analyzed using
descriptive statistics and inferential statistics methods and the hypothesis were tested at
0.05 significant level. Multivariate correlation, and multiple regression analysis tests
were also applied in data analysis. The regression results showed that income
shifting(𝛽1=0.134,p=<0.05),Capital intensity((𝛽3=0.377, p<0.05),Firm restructuring
(𝛽3=0.842, p<0.05) had statistically positive significant effect on on the performance
of the Manufacturing firms while expense deduction(𝛽2=-0.014, p>0.05) had no
statistical significant effect on the performance of the manufacturing firms in Nairobi
city ,Kenya.The study findings, concluded that income shifting, capital intensity and
firm restructuring tax planning strategies positively and significantly effects the
performance of manufacturing firms, further the findings revealed that expense
deductions had a negative effect on the performance of manufacturing firms. The study
findings recommend that manufacturing firms prioritise on firm restructuring as a tax
planning approach to improve their performance, tax practicing experts should advise
their clients to embrace income shifting, capital intensity and firm restructuring as
strategies to improve their firm performance, and also research to be done using other
variables so as to establish which other factors affects the performance of the
manufacturing firms in respect to tax planni