Effect of Royalty Payments on Tax Revenue Collection on Multinational Enterprises in Kenya

Purpose: The study sought to investigate the effect of royalty payments on tax revenue collection on MNEs in Kenya. The study was further explained by the accounting, economic and transaction theories. Methodology: The study adopted an explanatory research design and longitudinal research design while a secondary data collection method was used to collect data through content analysis of audited financial statements of a target population of 62 firms listed on the Nairobi Securities Exchange (NSE) in Kenya. The sample of the study was identified using inclusion-exclusion criteria to identify the 28 MNEs that met the sampling criteria for this study over an observation period of 11 years. Results: The study found that royalty payments negatively affect tax revenue collection (????=− 0.0000113, p = 0.025). Conclusion: The study concluded that there is a significant negative relationship between royalty payments and tax revenue collection. This study therefore recommends the government should introduce guidelines on royalty payments, specifically outlining the procedures through which an MNE should claim for deduction of royalty payments, from their incomes.