NAIROBI, Kenya
Kenya losses more than Sh100 billion annually in tax incentives to big multinationals. This is acc¬ording to a report released yesterday by ActionAid. This money could bridge budget deficit in this year’s budget.
A tax incentive, also known as a tax break is a special tax deal given to a company to encourage it to invest. “It is a paradox how government puts in measures for ordinary Kenyans to pay their taxes whereas big multinationals go scot-free,” said Pascaline Kang’ethe, Technical Advisor Action Aid, during the launch of the report in Nairobi.
The research indicates that multinationals are motivated by factors such as political stability and good workforce to set up businesses in Kenya and not tax incentives. “It is also worrying how county governments are wooing investors with unclear incentives such as land deals, tax breaks and other unclear tax deals to set up business in their counties.If not checked these incentives will be the haven of corruption in the counties. These incentives will also give unfair competition to local investors,” she added.
The report noted that this is one of the main reasons that Kenya is unlikely to achieve many of the Millennium Development Goals and escape the persistent of poverty that plagues even the poorer in the country.
They urged the government to reduce tax incentives to save the billions of shillings being lost. While the government needs to pare back the provision of tax incentives in this way, on its own is not enough. Reduced incentives, the report says, must be accompanied by two other important measures: transparency and cooperation.
First, tax incentives need to be opened up to public and parliamentary scrutiny and also the government need to cooperate with each other at county level to develop a coordinated approach to tax competition. “The government should at large withdraw tax incentives to big multinationals so as to lessen the tax burden on ordinary Kenyans,” it said.
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