The Effect of Tax Rates on Financial Performance of Small and Medium-Sized Enterprises in Busia County, Kenya

• Author(s): Sheillah Mukui ; Rashid Fwamba Simiyu ; Abraham A. Malenya
• Paper ID: 1709896
• Page: 1167-1171
• Published Date: 29-07-2025
• Published In: Iconic Research And Engineering Journals
• Publisher: IRE Journals
• e-ISSN: 2456-8880
• Volume/Issue: Volume 9 Issue 1 July-2025

Abstract

Small and Medium-Sized Enterprises (SMEs) play a crucial role in Kenya's economic development, yet they face significant challenges from taxation policies. This study examined the effect of tax rates on the financial performance of SMEs in Busia County, Kenya. Using a descriptive and correlational research design, the study collected primary data from 87 SME owners through structured questionnaires from a target population of 1,556 active SMEs. Data analysis employed descriptive statistics and simple linear regression. The findings revealed a strong positive correlation (R = 0.901) between tax rates and financial performance, with tax rates explaining 81.2% of the variance in SME financial performance (R² = 0.812). The regression coefficient (? = 0.864, p < 0.001) indicated that well-structured and predictable tax rates significantly enhance SME financial outcomes. The study concludes that transparent and stable tax rate policies create an enabling environment for SME growth. Policymakers should implement progressive tax rates that account for business size and revenue capacity to foster SME development.

Keywords

Tax Rates, Financial Performance, Small and Medium Enterprises, Kenya

Citations

IRE Journals:
Sheillah Mukui , Rashid Fwamba Simiyu , Abraham A. Malenya "The Effect of Tax Rates on Financial Performance of Small and Medium-Sized Enterprises in Busia County, Kenya" Iconic Research And Engineering Journals Volume 9 Issue 1 2025 Page 1167-1171

IEEE:
Sheillah Mukui , Rashid Fwamba Simiyu , Abraham A. Malenya "The Effect of Tax Rates on Financial Performance of Small and Medium-Sized Enterprises in Busia County, Kenya" Iconic Research And Engineering Journals, 9(1)