The Ernst & Young (EY) global organization has encouraged the government to maintain its current tax regime in the next financial year.
The government should focus on developing the country’s tax base to increase revenue collection. During a press briefing that happened on Tuesday, the EY Partner and Tax Leader Francis Kamau realized that the government center of a0ttention has been on increasing taxes each year affecting business growth and this hasn’t still been resulting in higher income.
“In the 2023/24 financial year, the government should focus on expanding the tax base by driving growth of key sectors in the economy such as agriculture and manufacturing, while also netting the informal sector and high net worth individuals,” Francis said.
Most citizens in the country are currently feeling the struggle that has been caused by high taxation. Most businesses thereafter transfer the costs to consumers yet this cannot be compared to the government services provided.
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“Increasing the tax rates every year, for items such as beer, cigarettes and other items yet those manufacturing companies need to continue investing in Kenya does not spur growth, actually the taxes should be coming down,” Kamau said.
In addition to that he encouraged the government to work hand in hand with other county governments so that big businesses that don’t pay taxes can be identified.
“The government through the Kenya Revenue Authority (KRA) should look for ways to capture those people, then lower taxes. Through this, there will be a better operating environment for businesses and also, they will have expanded the tax base resulting in higher revenue,” he said.
Anthony Muthusi, EY Partner and Business Consulting Leader saw it would be beneficial if the government reduced taxation on specific tax heads such as corporate tax that will attract more business set up in the country and navigate growth in the economy.
Anthony observed that in Kenya corporate tax is charged at 30 per cent but in developed economies it is charged lower. China is charged 25 per cent, the United States 20 per cent, Canada 20 per cent and United Kingdom 25 per cent.
Anthony Muthusi said, “There is merit in making things easier for businesses by lowering the rate so that they can invest more in the country. This will have a multiplier effect on the economy as a favorable tax regime attracts more business”.
“In turn there will be more jobs in the country resulting in more people in the tax net thus leading to more revenue, reducing the burden on the few people who are currently in the tax net,” he added.
The tax specialists also urged the government to improve tax administration in Kenya by creating an independent office that will offer advice on economic/ branding aspects about revenue collection.
President William Ruto recently declared that some taxes will be reduced in the 2023/24 financial year. “I have instructed the National Treasury to look at all the taxes, and have a look at them for a review in the coming financial year,” he said.
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