Taxation Practices and Financial Performance of Steel Manufacturing Firms in Nairobi County, Kenya

Steel manufacturing firms in Kenya operate in a capital-intensive and highly competitive environment in which taxation can affect compliance costs, investment decisions, cash flows and profitability. This study examined the relationship between four dimensions of taxation practice—tax compliance practices, tax governance practices, tax incentive utilisation and tax technology adoption—and financial performance among steel manufacturing firms in Nairobi County. A positivist, cross-sectional explanatory survey design was used. The study targeted all 33 steel manufacturing firms identified through the Kenya Association of Manufacturers database and obtained responses from all 33 designated finance managers or officers, giving a 100% response rate. Data were collected through a structured questionnaire and analysed in SPSS Version 29 using descriptive statistics, Pearson correlation and multiple linear regression. Financial performance was operationalised in the administered questionnaire through six Likert-scale statements concerning profitability and returns generated from the firms’ asset base. The regression model was statistically significant, F(4, 28) = 41.998, p < .001, with R = .926, R² = .857 and adjusted R² = .837. Tax compliance practices (B = 1.870, β = 1.990, p < .001), tax incentive utilisation (B = .408, β = .625, p = .017), and tax technology adoption (B = .595, β = .676, p = .008) were positively associated with financial performance. Tax governance practices were not statistically significant (B = .084, β = .140, p = .258). The findings indicate that compliance capability, effective use of legitimate tax incentives and tax technology are important dimensions of taxation management within the sampled firms, while formal tax governance arrangements did not demonstrate an independent statistical association with performance after the other dimensions were considered. The study recommends stronger integration of tax planning with financial decision-making and deeper integration of tax technologies with accounting and reporting systems.