The Hidden Costs of Public-Private Partnerships: A Critical Analysis of Risk Distribution in Government Contracts

The telecommunications industries have gain a huge interest of the scholars in the recent past partly to the high growth rate in the industry as well as the contribution of the industry to the development of economies of various countries because of the huge turnover characterized by the industry. In Kenya, the telecommunication market is continuously and rapidly undergoing considerable changes in the advent of increasing competition, fast developments in the mobile market as well as improved international connectivity. With the favourable revenue margins characterized by telecommunication companies, the telecommunication firms are viewed as lucrative tax space in Kenya. The telecommunication industry like other industries is subject to the fiscal policies of the country and hence are subjected to general tax payments including income taxes whereas the ICT services that the consumers purchase are subjected to VAT. The tax is paid by the consumer in the form of excise taxes, sales taxes, VAT taxes, income taxes or tariffs. The coming into effect of the Finance act 2021 further increased internet and telephone service excise taxes to 20% from 15% implying that in addition to paying the 16% VAT, the consumers are subjected to the 20% excise tax. This means that, for every amount the consumers spent on airtime, 36% is tax that goes to the government. The proposed study seeks to determine the effect of consumption tax on the performance financially of Kenyan telecommunication entities. The specific objectives were to find out the effect of excise duty, import duty and VAT on the performance financially of telecommunication companies in Kenya. The study further sought to determine if the firm size moderates the relationships between sin tax and the performance financially of Kenyan telecommunication entities. The study was guided by the benefits theory and the ability to pay theory. The study adopted a causal research design in answering its research questions. The population of the study entails 26 telecommunication entities whose data is collected between the periods January 2017 to December 2022 making 156 observations. When data collection is complete, the data was cleaned and organized in an excel sheet to simplify the process of data arrangement and analysis. The data was set to panel data and analyzed using STATA version 13. The analysis of the data entailed the inferential as well descriptive statistics. The descriptive statistics involved the mean, maximum, the minimum values as well as the standard deviation. Inferential statistics involved the multivariate panel regression model. The study concluded that excise duty and import duty have a positive and significant effects on the performance financially. VAT had a positive and significant effect on the performance financially. Firm size had a moderating effect on the relationship between consumption tax and on the performance financially. The study recommended that KRA ought to regulate the taxes imposed on the telecommunication entities in Kenya. Key words: Consumption Tax, Excise Duty, Financial Performance, Firm Size