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Two-year tax break for small traders will boost economy, Uhuru says

By Macharia Kamau and Dominic Omondi | Nov 13th 2020 | 5 min read
President Uhuru Kenyatta during the State of the Nation address event in Parliament. [Photo: Standard]

An initiative where small business will not pay single business permits or file presumptive taxes in their first two years is among government's achievements so far, the President has said.

While giving the State of the Nation address yesterday, President Uhuru Kenyatta also asked Parliament to pass the National Aviation Management Bill which would set the national carrier Kenya Airways (KQ) on the path to nationalisation.

These developments, said the President, were among his administration’s economic priorities in the last one year.

Uhuru said in that period, the government placed measures aimed at revitalising an economy that has been ravaged by the negative effects of Covid-19.

“Our initial focus in Nairobi City County has seen the waiver of Single Business Permits for all new businesses registered in Nairobi for the first two years of their operations, effective March this year," the President said.

"We also have waived the presumptive tax requirement for all new businesses.” In recent times, there have been numerous complaints of how businesses have suffered due to multiple licensing at both national and county governments.

He added that Kenya has also taken deliberate efforts to improve the ease of doing business, moving up 24 places in the World Bank’s Ease of doing business report since 2014.

“As an affirmation of our place of pride within the community of nations, Kenya now ranks first in protecting minority investors and fourth globally in getting credit,” said Uhuru.

Within the same period, the number of companies registered daily has increased by 500 per cent from 30 in 2014 to 200 in 2020.

An average of 300 new businesses have been created daily during the Covid-19 period. The creation of many businesses is an indicator of tough economic times that have seen about 1.7 million people lose their jobs between April and June.  

“On aggregate, 400,000 companies are annually registered in Kenya,” Uhuru said.

The National Aviation Management Bill 2020 proposes the formation of a state-owned aviation holding company which will run KQ, the Kenya Airports Authority and other aviation entities.

He noted that once ownership of the carrier reverts to the government will pave way for a resurgence of the airline that is currently experiencing different challenges that have seen continue making heavy losses for nearly a decade.

KQ has in the past said it needed a model that facilitates it to play a bigger role of enhancing Nairobi as an aviation hub that competes effectively with other players in the region, such as the Ethiopian Airlines and its Bole International Airport as well as Middle Eastern carriers that have threatened to overrun KQ at its home market.

“I urge Parliament to prioritise the consideration of various seminal Bills that are pending before the Legislature, such as the National Aviation Management Bill, which once enacted, will anchor the turnaround of Kenya Airways,” he said, also noting there are other proposed laws before Parliament that will substantially boost local businesses.

“Also before the House, is the Statute Law Miscellaneous (Amendments) Bill, Business (Amendment) Bill No. 2 of 2020 and proposed legislation on the administration of referenda and on enhancing governance and on deepening our anti-corruption efforts.”

Even as the country grappled with the adverse effects of the pandemic, the President said his administration never lost sight of the importance of the Big Four Agenda as an “economic development strategy or framework” to critical for the selection of priority areas.

The pillars of the Big Four are decent housing, food security, universal healthcare services (UHC) and the creation of manufacturing jobs.

“Economic development is not about intentions and activities; it is about results… The philosophy of the Big Four is anchored in four intentions which we have pursued relentlessly this year, despite the pendency of Covid-19,” he said.

“The first one is liberating our urban poor from the ‘poverty of dignity’ caused by poor housing and inadequate services… It is, indeed, a shame that almost sixty years after independence, a majority of our urban dwellers live in a ‘dignity poor’ environment.”

“The second is transitioning our young people from being ‘earners of wages’ to ‘owners of capital’. The third is building a holistic base of human capital that is food secure and health assured. And the fourth is jump-starting the shift from being a country of net consumption to one of production.”

Among the government’s housing projects that are expected to partially contribute towards solving the problem of urban housing include the houses in Park Road, in Nairobi’s Ngara , with President Kenyatta noting was delivered within budget and ahead of schedule.

The government has also operationalised of the Kenya Mortgage Refinance Corporation (KMRC), which the President said is expected to improve mortgage affordability and increase the number of qualifying borrowers.

Another of the government’s achievement during the year, the President said, was increasing the number of title deeds that the Jubilee administration has issued to Kenyans since 2013. Through the National Land Titling Programme, the government has issued 4.5 million titles in the seven years, which is in comparison to the six million that had been issued between independence and 2013.

“These are not merely abstract statistics. They represent very real gains for mwananchi and the resolution of longstanding historical land injustices,” he said.

Last week the government issued 10 000 titles to residents of Samburu County, which is in comparison to 2,000 group ranches that had been titled by previous governments. President Kenyatta added that by January 2021, the government will have issued another 15 000 titles.

He added that there are more reforms targeted at how the government administers land which includes digitisation of land records through the National Land Information Management System (NLIMS).

The Ministry of Lands is also drafting the Sectional Properties Bill, which will give owners of sectional properties such as apartments in highrise buildings more powers in the use of their property. It will also guide against unscrupulous real estate companies that, for instance, sell such properties but go behind the buyers’ back and use the mother title to secure a loan.

“Other reforms in the sector include the formulation of the Sectional Properties Bill to bring legal clarity to the ownership of sectional properties. This Bill is in its final stages before introduction in this House,” said President Kenyatta.

The number of households with access to electricity also reached 7.2 million and the government expects every household in the country to have electricity access by 2022. The president also said the government had completed a national geo-spatial mapping exercise, which was expected to identify the country’s mineral and other resources.

Earlier in the year, the government announced different interventions to enable Kenyans to cope with the Covid-19 pandemic. These included lowering income tax, Value Added Tax (VAT) and Pay as You Earn (Paye) tax, which resulted in the Kenya Revenue Authority (KRA) foregoing tax revenues to the tune of Sh176 billion this year.

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