Effect of Tax Incentives on Performance of Manufacturing Companies in Rwanda. A case of Sulfo Rwanda Industries

Alice Gatama and Tarus Thomas
University of Kigali
Email: alicegatama57@gmail.com

Abstract: This study examined the effect of tax incentives on performance of manufacturing companies of Sulfo Rwanda Industries. Specifically, the study attempted to assess the effect of capital allowance incentives on the performance of Sulfo Rwanda Industries Ltd. The study was guided by the Accelerator Theory of Investment and adopted a descriptive and explanatory research design using a mixed-methods approach. The target population comprised 142 employees of Sulfo Rwanda Industries Ltd, and a census approach was adopted. Quantitative data were analyzed using descriptive statistics, Pearson correlation analysis, and regression analysis, while qualitative data were analyzed thematically. The findings showed that respondents agreed that capital allowance incentives encourage investment in machinery and equipment, support modernization of production facilities, reduce taxable income, improve cash flow, and facilitate accelerated depreciation. Pearson correlation analysis revealed a strong positive relationship between capital allowance incentives and company performance (r = .801, p < .01). Regression analysis further established that capital allowance incentives had a positive andstatistically significant effect on company performance (β = .354, p = .000), with the model explaining 73.4% of the variation in performance (R² = .734). The study concludes that capital allowance incentives contribute significantly to the performanceof Sulfo Rwanda Industries Ltd by supporting productive investment, modernization, liquidity, and operational efficiency. The study recommends that the company should strategically maximize available capital allowance incentives when planning investments in machinery, equipment, and production technologies.