Tax, regulation top list of worries for CEOs

The biggest threats to doing business in the East African region are regulation and taxation. This is according to a report released last week on the outcomes of the East African Business Summit (EABS) held between June 14 and 17 in Kigali, Rwanda.

According to the report unveiled by advisory firm, PWC, nearly three-quarters of CEOs in the East African region were concerned by the cryptic regulation and taxation in most member states. The Summit was attended by 200 business and government leaders from the region.

“Many East Africa CEOs in PwC’s Africa CEO Survey say that protectionist government policies threaten growth prospects and their decisions about where to operate are influenced by local tax regimes, which can impact the cost of doing business,” said Rajesh Shah, a tax partner at PwC Kenya. Mr Shah noted that there was need for alignment on the regional tax and regulatory framework. “This will attract more investors and guarantee the ease of doing business across the region,” said Shah.

According to the report, participants of the summit were of the view that there should be free movement of goods, services and people across the region.

Zero-rating

While the Budget Statement read June 11 by National Treasury Cabinet Secretary Henry Rotich, did not explicitly curtail the movement of goods and services across the region, it imposed relatively higher tariffs on certain imports from foreign countries. This, the CS said, was meant to protect local manufacturers.

The CS also made several changes on the tax regime. The CS proposed an amendment to the Income Tax Act to allow the carry forward of tax losses for 10 years. This would come as a reprieve to companies undertaking huge capital projects which are likely to have tax losses due to accelerated / enhanced capital allowance, according to a post-budget analysis by PWC.

On value-added tax (VAT), most of the measures involved change of VAT status of supplies from the standard rate to the exempt status. The Government’s move to exempt these supplies as opposed to zero-rating was aimed at alleviating the perennial VAT refund challenges.

Also, as part of tax law reform process, Mr Rotich tabled a new Excise Bill in Parliament aimed at simplifying the current regime. Thus, there will be a new specific tax regime as opposed to the hybrid excise duty currently.

The Government also announced its intentions to operationalise the Kenya National Electronic Single System in the next financial year. When completed, the project is expected to facilitate trade by reducing delays and lowering costs associated with clearance of goods.