Kenya should craft new policy to tackle taxpayers' problems – Business Daily
A Kenya Revenue Authority staff assists a taxpayer file her tax returns at the iTax Support Centre in Nairobi Railways on June 30, 2020. PHOTO | DENNIS ONSONGO | NMG
Following recent elections, Kenya has a new administration and many citizens are eager for the new regime to roll up its sleeves and fulfil their promises to wananchi.
The new regime established by the Kenya Kwanza team has taken over at a time when tax revenue targets are lagging. The statement of actual revenues and net exchequer issues as at 31 August 2022 indicates that against the annual tax revenue target of Sh2.071 trillion for the financial year from July 2022 to June 2023, the Kenya Revenue Authority (KRA) collected Sh280 billion in two months.
Even though tax collection is not expected to be the same every month, KRA fell short of the Sh345 billion expected by the end of the second month of this financial year if we assume a monthly tax revenue of Sh172.5 billion. This indicates a deficit of Sh65 billion. Against this backdrop, the new administration has cut down fuel subsidies and shifted it to fertilisers.
Knee-jerk reactions to tax policies and measures are not sustainable. Businesses require certain, predictable and simple tax systems. A tax policy can help, and the new administration should proactively collaborate with stakeholders to produce one.
National Treasury has collected views on the draft national tax policy, but this was not advanced by Kenya Kwanza in its manifesto. The manifesto acknowledged that the tax revenue base must be expanded, but did not indicate how the new regime would go about that.
Kenya Kwanza said it was keen on doing this through taxing the informal sector, that is, the boda boda operators, beauticians, hawkers etc. but this is missing in its more detailed 68-page manifesto.
In the detailed version, Kenya Kwanza speaks more to incentives such as reducing the cost of importing agricultural inputs, providing tax incentives to encourage manufacturers in the pharmaceutical sector (dealt with by the Finance Act of 2022), automating value-added tax systems, reducing the cost of calls and data to encourage the creatives sector, tax incentives to convert public service vehicles to electric ones, tax incentives for corporates who sponsor sports, and import duty exemption for assistive devices used by persons with disabilities, among other things.
The new regime will need to finance its plans for the country even though it is coming after the country has already prepared its 2022/23 budget. Actualising some of the promises such as the Sh50 billion Hustler Fund will need to be financed, presumably through taxes.
A cursory look at Kenya Kwanza’s manifesto shows what the new regime will focus on in the short-, middle- and long-term. A tax policy should feature in the mind of the new regime in all these plans. Promises and budgets come at a cost to the ordinary businessperson in Kenya.
At the end of the day, revenue netting depends on facilitating income-generating businesses, assisting them to comply with their tax obligations through simple procedures, providing a stable and predictable environment, and putting the money to effective use. The new regime’s tax policy can provide direction in this regard.
The writer is Partner at Kieti Law LLP.
