ABSTRACT

 Reasonable concern often been expressed by both firms and individuals over the promotional effect of some incentives given by the government. Some people have openly expressed their disappointment over the inability ofsome ofthese incentive schemes to attract the desired level ofinvestment, despite the generosity of incentives embodies in them. Given the high level ofinflation and low demand for goods and services, whether the capital allowances being granted to firm do provide the much desired tax savings. Companies faced with the scarcity or lack ofinfrastructures; find out that the incentives embodied in the capital allowance scheme are anything but stimulating. This work is therefore aimed at finding out the impact of capital allowance on the performance of manufacturing firms. The data collected were secondary data and oral interviews were conducted. Two hypothesis formulated in order to facilitate the study were empirically tested by employing the Paired Sample T-Test. The analyses were executed with the aid of Statistical Package for Social Sciences (SPSS). The research findings revealed include: Capital allowance do stimulate the performance ofmanufacturing companies. Most companies do enjoy tax savings from the capital allowance claimed on qualifying assets. The capital allowance granted on qualifying capital expenditures has a significant difference on the profit aftertax manufacturing companies. The capital allowance granted has a significance difference on the earnings per shares ofthe manufacturing companies. In order to ensure that capital allowance as an incentive package to companies, achieves the objectives for which they are made, the following recommendations were made: Government should set up an appropriate committee to review the mechanism ofthe capital allowance scheme. This is necessary so as to increase the provision ofgranting capital allowance reliefs. Government should continue in its responsibility of providing basic amenities necessary for business activities to be carried on. These facilities go along way in helping companies and hence, the goal ofthe government will be achieved. Capital allowance rates should be periodically reviewed to blend with the inflationary trends in the economy. This implies that the capital allowance rates should be in the increasing rate in order to match with the high market prices offixed assets. Lastly, manufacturing firms are advised to continue in their purchase offixed assets whenever they are needed as the capital allowances granted on the assets have impacts on the profitability of the firm.