An analysis of the impact of changes in government taxation on corporate performance for African Distillers Limited (AFDIS) (2006 to 2011)

Abstract

This study analyses the impact of changes in government taxation on corporate performance in an organisation with particular reference to Afdis (2006 to 2011). This study seeks to ascertain the different forms of taxes that influence the organisation performance and recommend strategies that can be used by Afdis to reduce the impact of tax on corporate performance.

The study used questionnaires and interviews as research instruments. The questionnaires were administered to forty two employees at Afdis. These consisted of the supervisors, middle and senior management. The questionnaires were supplemented by thirteen interviews. The response rates for the questionnaires and interviews were 83% and 76% respectively. The questionnaires mainly had closed questions and the interviews used semi-structured open ended questions.

The major findings were that the ad valorem structure and changes in excise duty experienced in the period under review adversely affected the organisation’s performance and competitiveness. Middle management and supervisory employees agreed that the strategy to import products from Distell was as a result of the increase in excise duty from 20% to 40%. Respondents added that some brands especially cane spirits were cheaper to import because of the ad valorem tax structure. The study concludes that changes in government taxation policies had a negative impact on the performance of Afdis. Some products were discontinued and the company lost market share on those products. Long term strategies to achieve competitive advantage include transfer of products from bonded warehouse on fast moving products. This facilitates monthly payment of duties only on products that move quickly than tying up money in slow movers if all products were transferred to the bonded warehouse. The Company’s relationship with its principals should result in continued expansion and establishment of a full range of regionally and internationally branded product to complement local product. Recommendations include diversification into non alcoholic products which do not pay excise duty, focusing on high margin products and ensuring that product is always available.