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Tax Predictability is Significant in Stimulating Business Growth

  Mar 24, 2017

A sustainable and predictable tax regime in Kenya remains a key pressure point in  stable economic growth. As recorded by The National Treasury of Kenya, there has been a progressive increase of tax receipts over the years, making it difficult to maintain a stable, transparent and fair tax system. How do sporadic tax regimes affect businesses?

Strathmore Business School hosted The Tax Predictability summit, converging key stakeholders – business practitioners, economists and representatives from tax and manufacturing regulatory bodies, all in bid to seek active participation in pursuit of tax predictability.

Dr. James McFie stressed that integrity in the management of public funds was critical adding that public finance mismanagement causes unnecessary burden on the taxpayers. “Unpredictable tax regimes founded on short-term plans end up providing a fertile breeding ground for trade in contraband among other economic ills,” he noted.

The Kenya Association of Manufacturers (KAM) CEO Ms. Phyllis Wakiaga regretted that local manufacturers are fast losing their competitive edge to other regional firms due to the unpredictable nature of the local tax regime.

To foster national growth, Wakiaga noted that taxation policies will need to be aligned to long-term national development plans such as Vision 2030. “The ongoing culture of tax regimes that are far removed from the national development agenda is regrettable. Taxation should be predictable and broad-based, enabling economic agents to plan accordingly, therefore securing a strong future for businesses and the economy at large,” said Ms. Wakiaga. The public session was held ahead of the Budget Statement reading for the financial year 2017/2018 scheduled to take place on 30th March 2017.

Phillip Muema, Founder of Nexus Business Advisory affirmed that tax predictability is critical for business growth as it provides a solid base for long term business planning. Such efforts he said can potentially accelerate tax collections by 30% through facilitation of tax administration procedures by boosting compliance. “A sound tax system ensures that the government is able to raise revenue internally. That is why a robust tax system should be informed by progressive tax reforms necessary to ensure that the business community, farmers among other economic actors continue to enjoy an enabling environment to flourish,” Muema said.

Christine Mbaabu and Flora Ikabu from Tharaka Nithi recounted their devastating experiences of an unpredictable remission rate in sorghum farming. “We started off as a group of farmers seeking a better source of income from sorghum farming but our efforts have continued to suffer unnecessary disruptions’ due to falling market prices,” Ms Ikabu explained. Even for small-holder farmers seeking to diversify their incomes, Ms Ikabu said the stability of the tax regime would continue fostering the adoption of such non-traditional cash crops such as sorghum, sunflower and stevia.

The global tax agenda is increasingly moving towards an environment that facilitates a conducive, coherent and predictable tax regime.

Excerpts from Standard Digital Media.

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