Factors affecting the use of export incentives for exporters in Kenya : a case of the Tax Remission for Exports Office TREO

Abstract

After implementing the import substitution industrialization strategy during the first decade of independence, the stage was set for export promotion since import substitution had reached its limits. This move was accelerated further by the effects of the oil crisis of 1973. Though the government has put in place various export incentives schemes, export development is yet to gain momentum. Incentive schemes are underutilized to an extent that the objectives unto which they were set are not easily quantifiable. Various government schemes have been designed to promote export policy, where some have been phased out after being found to be ineffective. The study looked at the experiences of provision of fiscal incentives in other countries and how this has affected the development of an export strategy. Experiences from other countries that have taken this direction revealed that a number of the Trade Promotion Organizations (TPO) such as TREO are far from achieving their objectives. In most cases, they are influenced by donor agencies, while others are being financed by governments with supplementary financing from foreign aid. They do not enjoy the support of the business community nor industrialists and are not demand driven, but rather the government effort to persuade eligible users to apply for concessions. The study looked at four hundred registered firms/companies under the Tax Remission for Exports Office (TREO), where the first category had one hundred active members while the second category had three hundred inactive members. Stratified sampling method was used to identify the two categories, followed by a simple random sampling method to sample eighty members of the active category and one hundred and sixty nine members from the inactive category. The study looked at the factors determining the use of the facility by the active members and the factors determining the non-use by the remaining inactive members. The data was analyzed using descriptive statistics and other tools of central tendency such as mean, mode, median and standard deviation. Finally, the study made legislative and administrative recommendations on how to improve the suitability and applicability of the fiscal incentive scheme for the benefit of eligible exporters.