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Bad tax policies are killing local firms, says KAM

By Peter Theuri | August 25th 2021
Kenya Association of Manufacturers CEO Phyllis Wakiaga. [File, Standard]

Dwindling support of local manufacturing might bolster illicit trade, cripple local manufacturing hubs and lead to loss of jobs, Kenya Association of Manufacturers (KAM) has warned.

KAM Chief Executive Phyllis Wakiaga warned that unless urgent action is taken, Kenyans, already suffering economically due to Covid-19, will continue to experience “a stagnation of business”.

“As an association, we have emphasised time and again on the need to nurture local businesses to increase their productivity, which will in turn naturally increase government’s revenue streams,” Ms Wakiaga said at a press briefing yesterday.

“Instead, what we are seeing is that there has been no focus to streamline and make flexible the formalisation process that allows more businesses to be profitable and increase the country’s tax base.”

KAM also criticised Parliament’s rejection of the Public Procurement and Asset Disposal (Amendment) (No. 3) Bill. The Bill proposed that foreign contractors source not less than 40 per cent of supplies locally. 

It also sought to increase the limit for tenders where Kenyan citizens are given exclusive preference from Sh500 million to Sh20 billion.

KAM Chairman, Mucai Kunyiha.

“This move (rejection) negates efforts to achieve the ‘Made in Kenya’ goal. It contradicts with the 2015 presidential directive that requires that 40 per cent of public procurement be reserved for locally produced goods and services,” said KAM Chairman Mucai Kunyiha.

“Additionally, it shall deter industrial growth since local manufacturers are not able to compete on a level playing field with foreign companies who, in most cases, are always better equipped.”

Mr Kunyiha also said the punitive tax regime will continue to give an upper hand to Kenya’s neighbours and looking to avoid pay higher, local businesses may opt for underhand methods.

“The gap between excise tax in Kenya and neighbouring countries will continue to increase,” he said. 

“Currently, excise rates are five times more in Kenya compared to Tanzania and Uganda, therefore Kenyan excisable goods will continue being uncompetitive, with higher levels of illicit trade that deny government revenue through tax evasion.”

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