Asian Journal of Economics, Finance and Management

The profitability of agrochemical dealers is essential for the sustainability of Kenya’s agricultural sector, a cornerstone of the national economy. However, between 2018 and 2024, leading agrochemical firms reported a decline in profit margins by approximately 8%. This study assessed the effect of business taxation on the profitability of agrochemical dealers in Nairobi City County, focusing on four tax categories: Value Added Tax (VAT), corporate tax, excise duty, and import levy. The study was guided by the theories of optimal taxation, the Laffer Curve, and profit maximization. A causal (explanatory) research design was adopted, targeting 110 registered agrochemical dealers. Data were collected through structured questionnaires, following a pilot test and reliability checks. Quantitative analysis involved descriptive statistics and inferential methods, including correlation and multiple regression. The results revealed that all tax types had a statistically significant negative impact on profitability, with VAT having the strongest effect (β = -0.483, p < 0.001). The regression model explained 62.7% of the variance in profitability (R² = 0.627). The study concluded that high tax burdens significantly constrain profitability in the agrochemical sector. It recommends tax reforms such as graduated tax rates, VAT exemptions for essential inputs, and incentives for local manufacturing. Agrochemical dealers are also encouraged to adopt strategic pricing, local sourcing, and sound tax planning to enhance profitability.