NAIROBI, Kenya, April 18 – Tax experts at Ernst & Young(EY) have urged the government to maintain the current taxation regime in the next financial year and focus on expanding the country’s tax base to increase revenue collection.
Speaking during a press briefing on Tuesday, EY Partner and Tax Leader Francis Kamau noted that the government has been focusing on increasing taxes each year hurting business growth and this hasn’t still been resulting in higher revenue.
“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,” he said.
Kamau noted that most citizens in the country are currently feeling the pinch of high taxation as most businesses transfer the costs to consumers, and this cannot be compared to the government services received.
“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,” he said.
Further, he urged the government to work closely with county governments to identify people at the grassroots who have big businesses but don’t pay taxes.
“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.
On his part, EY Partner and Business Consulting Leader Anthony Muthusi urged the government to look at reducing taxation on specific tax heads such as corporate tax to drive growth in the economy and attract more businesses to set up in the country.
Muthusi noted that in Kenya corporate tax is charged at 30 per cent whereas in developed economies it is lower, in China it is 25 per cent , the United States 20 per cent, Canada 20 per cent and United Kingdom 25 per cent.
“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,” Muthusi said.
“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 said.
The tax experts also urged the government to reform tax administration in Kenya by developing an independent office that will advise on economic/ branding aspects of revenue collection.
For instance, on issues such as closure of entities or bad publicity, the office will advise on the impact the same has on Kenya as an investment destination.
Last week, President William Ruto announced that some taxes will be reduced in the 2023/24 financial year noting that some of the taxes are impunity and encourage more dodging than paying and non-compliance.
“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.
The Treasury expects to collect Sh2.89 trillion in revenues to fund the Sh3.63 trillion 2023/24 budget, a 15.1 per cent increase from the estimated Sh2.51 trillion to be collected in the current financial year.
