Enacting the National Tax Policy to Address Kenya's Tax-Related Issues
Ready to tackle the complex, confusing mess that is our tax system, Treasury Cabinet Secretary John Mbadi aims to navigate our country's public debt towards more sustainable waters. But, the annual chaos surrounding the finance bills and our ever-evolving, frustrating tax system isn't making things easy. In the last couple of years, the government has thrown out tax proposals that have left us scratching our heads, annoyed, and even enraged, resulting in lawsuits, heated public participation events, and unprecedented riots and protests.
Experts argue that this complexity is dimming our hopes for an economic recovery, let alone a takeoff. To thrive economically, we need a straightforward tax system, simple and easy to understand — something the World Bank recently warned us about, pointing out that our unpredictable tax regime risks turning off foreign direct investments. They argued that constant changes in regulations and policy shifts make investment a risky proposition and hinder growth.
In line with its Bottom-up Economic Agenda (BETA), the government rolled out the National Tax Policy back in 2023. The idea was to ensure tax predictability and simplicity by scheduling a comprehensive review of tax laws every five years. However, the reality has been far from that. Instead, the amendments to the tax laws in the last three financial years have provided nothing but uncertainty. This has led to investor apathy in several ways.
Firstly, good investment decisions are based on forecasts and proper budget planning. To achieve this, investors seek stability and predictability. A tax code that keeps changing creates uncertainty and makes it difficult to plan for the future. Businesses tend to shy away from an environment where tax rules are constantly in flux. As a result, there will be reduced investments, and our country will struggle with job creation and economic growth.
Secondly, our vibrant entrepreneurial spirit has been a key driver of progress for decades. Small and medium-sized enterprises (SMEs) have been the backbone of our economy. However, a convoluted tax system disproportionately burdens them. Large corporations can navigate the murky waters of tax complexities through consultancies and expert advisory. SMEs, on the other hand, struggle to comply. This leads to diversion of resources and energy away from core activities like innovation and expansion. A simpler system would free up valuable resources for SMEs to focus on growth, which would then spur development in other sectors like banking and insurance.
Thirdly, when taxes are easy to understand, they're more often complied with. The result? A reduction of the administrative burden on both businesses and the tax authorities, leading to increased tax revenue collection. Additionally, a transparent and straightforward system fosters trust between taxpayers and the government, encouraging voluntary compliance and reducing the need for costly enforcement measures.
To reach its goals, the government should simply implement the National Tax Policy. Besides pushing for tax predictability and simplicity, it outlines measures that would achieve objectives of BETA, including widening the tax bracket, reviewing the tax dispute resolution processes, and committing to develop rules in line with international best practices. By doing this, the government would be halfway towards achieving its revenue objectives.
Stay tuned for more on the National Tax Policy and its impact on our economy. And remember, happy taxpayers make for a healthier, more prosperous nation!
Related Topics:- Treasury CS John Mbadi- World Bank- Bottom-up Economic Agenda- National Tax Policy
- Treasury Cabinet Secretary John Mbadi's aim to steer the country's public debt towards more sustainable waters is facing challenges due to the annual chaos surrounding finance bills and the complex tax system, which experts argue is hindering economic recovery.
- The government's Bottom-up Economic Agenda (BETA) introduced the National Tax Policy in 2023, aiming to ensure tax predictability and simplicity, but recent amendments to the tax laws have instead created uncertainty, leading to reduced investments and investor apathy.
- A simpler tax system would not only spur economic growth and job creation by making it easier for businesses to plan and invest but also alleviate the burden on small and medium-sized enterprises (SMEs), freeing up resources for innovation and expansion.
- To achieve its revenue objectives and foster a healthier, more prosperous nation, the government should focus on implementing the measures outlined in the National Tax Policy, including widening the tax bracket, improving the tax dispute resolution processes, and adhering to international best practices.
