House told to exempt all investors from new tax
Lewis Njoka @LewisNjoka
Parliament is seeking to cushion large investors in the manufacturing sector and those who have invested in Special Economic Zones from the controversial minimum tax.
In a report on the Finance Bill 2021 tabled on Tuesday, the National Assembly departmental committee on Finance and National Planning proposes to amend section 12D of the Income Tax Act such that that a manufacturer whose cumulative investment in the preceding four years is at least Sh10 billion should not pay minimum tax.
“The amendment is to exempt from minimum tax a person who is engaged in manufacturing and whose cumulative investment is at least ten billion shillings and also a person who is licensed under the special economic zones act,” reads the committee report.
Tax experts, however, have termed the proposal as discriminatory, saying it favours the super rich and foreigners at the expense of the common citizen.
Francis Kamau, Tax partner Ernst & Young said his view has been that the minimum tax should be scrapped altogether for all.
The patchwork on Export Promotion Zones, Special Economic Zones among others, are to distract us from demanding for scrapping of this outdated law that many countries have deemed remote, unfair and crude,” said.
“ The patchwork on Export Promotion Zones and Special Economic Zones among others, are to distract us from demanding scrapping of this outdated law that many countries have deemed remote, unfair and crude,” he said.
Tonny Osambo, a tax expert said restricting the exemption only to billionaires and the economic zones is to give an opportunity to outsiders and the high class people at the expense of our common man which kills small industries and enterprises.
“These small industries in aggregate produce and consume more than the billionaires,” he added.
Manufacturing sector
He singled multiplicity of taxes in the country as a key challenge to companies, saying it made compliance difficult and more expensive.
Osambo’s sentiments were echoed by Daniel Ngumy, a tax lawyer who noted although it was a good idea to incentivise the manufacturing sector only a few manufacturers would qualify.
He said the fact that such a young law was being amended for the third time in a year shows that the law is defective, adding that even the latest amendment was unclear.
“Even if the law was clear, manufacturers who do Sh10 billion in Kenya are very few. That’s the reality. The large bulk of manufacturers in Industrial Area will not qualify,” Ngumy said.
“There is an underlying problem with the legislation and the whole issue needs to be reconsidered,” he added.
In February, , announced that people engaged in businesses where the retail price is controlled by the government, such as petroleum dealers, those engaged in insurance business and those in the extractive sector, such as mining, were exempted from the minimum tax.
Similarly, Income from employment, residential rent income, and any income subject to capital gains tax will also not be subject to controversial tax.
