Private sector calls for stable taxation policy
President William Ruto has been urged to make good on his tax reforms pledges if businesses are to thrive in an economy yet to shake off the August 2022 election blues.
Kenya Private Sector Alliance (Kepsa), which brings together business community in a single voice, said Ruto’s administration needs to put in place a policy-predictable environment to entice investments.
“The local taxation regime is still generally unresponsive to the demands of both large and small businesses,” said Chief executive Carole Kariuki. The association also called for overall transparency in the taxation reform process amid plans to rename Kenya Revenue Authority (KRA) to Kenya Revenue Service.
“Even so, we applaud the President’s commitment to maintaining the tax code’s consistency and predictability to support long-term investment strategies. This will help make the policy and regulatory framework around tax collection and administration more transparent,” she said in statement.
Business growth
Voter anger over perceived unfair tax rules tilted in favour of big corporations, pigeon-holed campaign slogans by the then presidential candidates William Ruto and the Opposition leader Raila Odinga, in what the former swore to “fix” should he ascend to power. While the new administration has attempted to remove many bottlenecks to business growth since taking over the reins of power on September 13, including making credit reachable to small businesses (SMEs), KEPSA is still apprehensive.
It believes that the problem of policy paralysis in the current taxation regime is holding back key projects in the last-mile clearances such as land purchases.
“The government can use a “demand-driven consumption” paradigm to further integrate small businesses into its procurement value chains in implementing Vision 2030 projects and other projects,” said Kariuki. A number of projects managed by private companies have become unviable due to cost overruns and the tough economic situation leading to lower growth, continuing to fester amid the lingering war in Europe.
And as big number of Kenyan businesses wallow in inflation– filled concerns as well as the unhinged value of the shilling, currently trading at Sh120.90 against the US dollar, Kepsa officials want the pronouncements by President Ruto on affordable and available credit to SMEs be made a reality.
Access to credit
“Businesses should have more access to credit as a result of the proposed reforms in the current Credit Referencing Bureau (CRB) framework into a credit rating system rather than a blacklisting organisation,” the lobby said.
The Kenyan SME sub-sector which creates over 80 per cent of employment is still overburdened by the rising inflation with a good number forced to absorb high input costs amid declining consumer spending.
For instance, the prices of raw materials have gone up by about 20 per cent making the production of goods costlier in comparison to amounts seen last year, worsened by the unpredictability of supply chains. In his inaugural speech, President Ruto said his administration will work with credit reference bureaus to create a new system of credit score rating that provides borrowers with an opportunity to manage their creditworthiness.
“Our starting point is to shift the CRB framework from its current practice of arbitrary, punitive, and all or nothing blacklisting of borrowers,” he said. But some of those promises could take time to materialise if Tuesday’s statements by National Assembly Deputy Speaker Gladys Shollei are anything to go by. Shollei said it will take at least one year for Kenyans to feel the impact of the new administration in correcting underlying economic shortfalls.
