KRA and Treasury in efforts to stabilise tax policy

Cabinet Secretary for National Treasury Henry Rotich (left) with Kenya Revenue Authority Commissioner General John Njiraini. (Photo: File/Standard)  

The taxman and the Treasury have created a framework to instil consistency in the country’s tax policy.

Businesses have been hurting from a volatile tax policy environment in which taxes are raised and reduced unpredictably.

However, Kenya Revenue Authority (KRA) Commissioner General John Njiraini noted this situation will soon be brought under control.

“We have a framework that comes with clear objectives. For example, we could find out what the Government’s objectives in terms of driving business are? Which sectors does the Government want to encourage? What incentives are available there?” said Njiraini.

He said with such a policy framework in place, sectors given certain incentives will enjoy them until the defined period elapses. An inconsistent tax policy has made it difficult for firms to effectively plan their businesses, with some being forced to incur huge losses as a result of the drastic tax changes.

“One of the concerns you have heard from the private sector is about policy certainty. If I am investing I want to be able to know that the environment I am investing in is not going to radically shift for a period of time, because if it shifts and I had already factored certain parameters in my business plan then the business plan will get out of control,” said Njiraini who noted that tax is a critical parameter.

Mr Njiraini was speaking during the second annual tax summit on Wednesday. The policy will run for a certain period of time to ensure stability.

One of the companies that have been affected by the frivolous tax policy is East African Breweries Ltd to who tax is a major cost component. “The only way you invest is because you know you will recover your cost within a period of time,” said Eric Kiniti, EABL Corporate Relations Director.

“If I don’t have a clear picture on what the tax will be for the next five years it becomes very difficult for me to make a decision. So in terms of Kenya being seen as an attractive business destination, with a volatile tax environment then it becomes very difficult for us to attract foreign direct investment,” said Kiniti.

When the Government revised the tax remission to sorghum, the company was left with so much stock of sorghum as there was no demand from farmers.

Tax policy predictability has been driven by lobbyists, but now the Government has created a structure for driving tax policy, said Njiraini.

The commissioner also said that there are ongoing high-level discussions on how to implement presumptive tax for the hard-to-tax populations as outlined by Cabinet Secretary for National Treasury Henry Rotich in his budget speech.