Financial experts are urging Treasury CS Njuguna Ndung’u to ensure the upcoming budget aligns with current tax policies to enhance investor confidence.
Billow Kerrow, a political economist and former Chairperson of the Senate Finance and Budget Committee, warned against inconsistent tax policies that could drive investors to more tax-friendly countries, reducing Kenya’s role to a less profitable distribution hub.
“Businesses shut down or relocate when operating costs become too high, making them less competitive. Taxation is a major factor in these decisions,” Kerrow explained.
He also advised the government to consider the recommendations of business groups and professional bodies that have opposed certain aspects of the Treasury’s proposals.
“During the budget-making process, the government consults with businesses. These businesses engage extensively with the National Treasury even before the Finance Bill is drafted. However, political expediency and mismanagement often lead the government to deviate from what was agreed upon with the businesses,” Kerrow noted.
Solomon Kihang’a, a tax specialist at KPMG, highlighted the importance of tax predictability for business planning.
“One fundamental principle of taxation is certainty. A predictable tax policy allows a business to plan for its future. Although our tax policy advocates for this, the finance bill contradicts it,” Kihang’a said.
He also pointed out that last year’s reduction in excise duty on money transfers from 20 percent to 15 percent was a positive step towards financial inclusion and secure money movement.
However, the Finance Bill 2024 has reverted the rate to 20 percent, undermining the predictability needed for effective business planning.
