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Firms endure long hours to meet tax requirements

Updated Friday, December 4th 2009 at 00:00 GMT +3
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By Jackson Okoth

It takes longer for businesses in Kenya to comply with tax requirements, compared to neighbouring countries, a report released by the World Bank and PricewaterhouseCoopers (PwC) says.

The fourth edition of Paying taxes 2010 says it takes 417 hours for a company in Kenya to calculate and pay all required taxes, far longer than in Burundi, Rwanda, Uganda and Tanzania.

The world average is 286 hours, placing Kenya as one of the countries with the most complicated tax system in this part of the world.

However, the administrative burden of paying taxes could ease in the next two years as Kenya Revenue Authority (KRA) implements an electronic tax payment system.

"A large part of this compliance burden is experienced in the payment of Value Added Tax," said Rajesh Shah, a tax partner at PwC.

The report says that in Kenya, it takes a company 60 hours to prepare, file and pay corporate income tax, 57 hours to comply with requirements for labour taxes, and 300 hours to deal with Value Added Tax (VAT).

The report also shows that Kenya has 41 different tax payments, far above the African Union average of 37 payments. Tanzania has the highest tax payments in the east Africa.

Total tax rate

While Kenya’s total tax rate has declined to 49.7 per cent, from 50.9 per cent, its ranking has dropped from 132 to 134, while compliance hours, and number of payments, have remained the same over the period.

The introduction of electronic filing is expected to improve Kenya’s rankings, and remove the administrative cost of paying taxes by businesses.

"Treasury and KRA have recognised this fact, and are re-looking at the tax system to make it easy for business to comply," said Shah.

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