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Parliamentary energy committee say tax exemptions untenable

By Milliam Murigi
Friday, November 8th, 2019

Amid dwindling tax collections in Kenya, stakeholders in the renewable energy sector want Parliament to repeal taxes on solar energy products, saying this will spur growth in the sector.

They say this move was prompted by increasing prices of solar products after Treasury expunged value added tax (VAT) exemption on solar accessories last year, making the business untenable for investors.

At a meeting with the Parliamentary trade committees, the Kenya Renewable Energy Association (Kerea) presented its case on the negative impact of taxation since exemptions were implemented on solar energy products in 2013.

“We were excited because we knew that the use of renewable energy would achieve deeper penetration within the country, due to the lower costs of solar energy products. However, with the withdrawal of the tax exemption, the use of renewable energy continues to be an unachievable dream for many Kenyans,” said Kamal Gupta Kerea Chairman.

Expansion challenges

Kamal said lack of tax incentives for solar energy products has hindered companies from setting up offices in Kenya, adding that those already in in the country have been unable to expand to other countries.

Coming at a time when Kenya Revenue Authority has been unable to meet tax targets, it is a catch 22 for the government, even as calls for tax exemptions soar. 

Ola Energy is among firms recently quoted by Business Hub asking government to ease the business environment for them.

“It is quite unfortunate that politics is taking shape in our economy. We have seen different departments/sectors asking for tax waivers. We cannot continue this way because if we give tax waivers to all industries where will we be getting our revenue as a country?” said parliamentary Committee on Energy chairman and Nakuru Town East Member of Parliament David Gikaria.

Quality products

He advised stakeholders to ensure that they are bringing quality products that last longer and with that, they will forget the issue of tax exemption.

Despite the potential of renewable energy, the country has not been able to fully utilize it. 

Reports indicate that Kenya has only managed to harness about 30 per cent of its hydropower sources, and a paltry four per cent of its geothermal resources. 

Solar and wind power constitute even lower proportions.