The Kenya Revenue Authority (KRA) has asked the government to consider withdrawing tax incentives given to foreign investors to boost revenue collection in the country.
The taxman is proposing a retire of a tranche of existing tax incentives and concessions offered to investors such as the Export Processing Zones (10 year tax holiday, duty free import of materials/inputs), 100% Capital Investment deduction for manufacturing, Double Taxation Agreements and the proposed Free Trade Zone (FTZ) Bill.
KRA Commissioner General John Njiraini says that the effect of these inducements has been tissue-thin as other policies touching on ease to do business in the country can woo more investors compared to the tax holidays.
“Studies have shown that the main reasons foreign firms invest in Kenya are; access to the local and regional market, political stability, security, infrastructure, market size, quality of labour, power costs, regulatory certainty and favourable bilateral trade agreements. The effect of tax concessions offered by incentives is very minimal,” said Njiraini while addressing envoys in the ongoing ambassadors and high commissioners conference in Kwale.
“Globally, tax incentives rank low as key investment criterion and the case is replicated in East Africa where such tax incentives are ranked at position 9, 17, 14, 17 and 21 in Burundi, Rwanda, Uganda, Tanzania and Kenya respectively.”
At the same time, Njiraini noted that Ksh30 billion backlog of Value Added Tax (VAT) payout will be resettled in the next three months as KRA looks for raft measures to address the long term sustainability of VAT refunds management according to KRA Commissioner General John Njiraini.
“The new VAT Act provides a platform to address the long-term sustainability of VAT refunds management. All VAT refunds will now be undertaken within 90 days,” said the KRA boss.
The authority will also be pursuing a process to fast-track the resolution of pending tax disputes at the Tax Appeals Tribunal which could see it unlocking more than Kshs25 billion in disputed assessments.
The agency has also petitioned Judicial Service Commission (JSC) for the establishment of a High Court Tax Division that will unlock the Ksh33 billion held up in judicial court process.
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