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Firms welcome scrapping of some taxes, want more cuts

 Kenya Private Sector Alliance (Kepsa) chief executive Carole Kariuki speaks during a presser in August 2022. [Wilberforce Okwiri, Standard]

The private sector has welcomed the scrapping of the 10 tax proposals by the government as had been contained in the Finance Bill 2024 for the financial year 2024-2025.

President William Ruto on Tuesday bowed to pressure from Kenyans and said some tax proposals have been scrapped, including a 16 per cent value-added tax on bread, on transportation of sugar, and on financial services and foreign exchange transactions.

Others are mobile money transfers whose tax will remain unchanged, 2.5 per cent motor vehicle tax removed, the same as excise duty on vegetable oil and locally manufactured products.

Also, the housing levy and Social Health Insurance will become income tax deductible.

“We welcome the scrapping of some of the taxes by the Finance Committee and President Ruto," said Kenya Private Sector Alliance (Kepsa) chief executive Carole Kariuki on Wednesday.

"We have been in discussion with the Senate and give them proposals from the business sector. Out of the 16 scrapped, 10 of the tax proposals concerned businesses and were influenced by the private sector.

"About five or six, nothing was said about them on Tuesday and we will look forward today and tomorrow to see if they will be acted on today or tomorrow.”

Ms Kariuki was addressing the media at Kepsa offices, Nairobi together with Kepsa directors.

She said the other proposals are on coal tax on clinker production, capital markets, VAT on micronutrients, foliar feeds on fertiliser, tax on transfer of property under REITS, exercise duty on locally assembled tourism vehicles and capital gains tax.

Businessman Vimal Shah, who is a Kepsa advisor, said the edible oil industry has 13 plants with a total installed capacity of 2.2 million tonnes per year.

The government had proposed a 25 per cent excise duty on crude palm oil and cooking oil in the Finance Bill 2024.

“Our total demand is about 800 to 900 tonnes for finished products and thus we have more than double the capacity. To make edible oil affordable, there is a need for public-private partnership (PPP) and to open up more land to grow sunflower and soya since there is currently competition with maize and other crops," said Shah.

Kepsa chairman Jans Bedi disputed claims that Kenyans are not paying enough taxes, saying the country's tax collection is 15.2 per cent of gross domestic product (GDP) and in comparison with countries like India which is at 11.4 per cent, China at 14.6 per cent and are all developing economies.

“I understand there are countries that are at 28 per cent and 42 per cent and those are developed countries like the USA. When you look at South Africa, it's 24 per cent but their economy is based on mineral wealth and resources and Kenya’s 15.2 per cent is not bad as we move from developing towards middle-income country,” he said.

He said there is a need to support the manufacturing sector to create jobs and increase exports.

Bedi said it is a shame that currently the sector contributes about nine per cent to GDP and decreased from 9.3 per cent in 2016 to 7.2 per cent in 2021 as per (KNBS, 2022), yet 28 to 29 per cent of the economy’s GDP is driven by financial and services and manufacturing sectors.

“This is despite there being a huge market both at East Africa Community level, Common Market for Eastern and Southern Africa, African Continental Free Trade Area and African Growth and Opportunity Act. We can grow the manufacturing sector if we make sure that we are globally competitive,” he said.

“The size of the USA AGOA duty-free market is $100 billion yet Kenya is exporting only 0.5 per cent, while we should be doing $42 billion. We need to start mapping out every sector and ask ourselves what is their comparative and competitive advantage.”

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