Taxation: We should be Slow to Implement Some Taxes lest we regret

By Juma Fred / January 5, 2018

There has been a lot of debate in the past one week on tax. This followed the changes in the Finance Bill 2017 that was published on 3rd April 2017 and one that amended various tax provisions while at the same time, providing insights and clarity on the existing provisions.

One thing that stands out in the Finance Bill 2017, is the 35 percent tax on revenue generated by some companies in the country. In fact, before it came to 35 percent, it had been quoted at 50 percent. Now, let us talk numbers, citing actual companies and some of the ramifications of such measures. I will use KenGen as an example.

Take KenGen for instance, if the company was to be taxed 35 percent on their 38 billion shilling revenue, they would actually go at a loss of 1.6 billion shillings. This is because, complying with the 35 percent tax, the company will have to part with 13 billion shillings in taxes. This will be an increase from the current 4 billion shillings.

What will happen to KenGen if the taxes were to be affected by it? One instant thing will be for it to cut down on its spending, laying off employees and, of course, Kenyans will have to brace for continuous nationwide blackouts.

Now, let us think it this way, casinos employ a majority of Kenyans and attract a good number of tourists. I have seen quite a number of then in town, if a casino closes down, the job and the tourism market would both be causalities.

With the new 35 percent tax, the first causalities will be lotteries. Contrary to what many people believe, lotteries in this country are already operating under stringent measures, paying 50 percent in prizes and giving 25 percent to charity. An additional 35 percent would mean gagging them and closing them down, loss of jobs, investments and so on.

I may not be against the 35 percent but in my view, any business that will comply with the 35 percent tax on its revenue would be in a fight for survival. Check this out:

I remember, at some point, EABL did write to the government protesting fluctuating tax rates which made it difficult for them to do business in Kenya. Look at it in the long term. This tax increase currently targets gaming. What industry will fall next to such unprecedented decisions? Health, exports, food, transport, tourism, hospitality? Furthermore, where will it end?

This brings about the issue of public participation. Who was consulted and who was left out? Did they consider the 30 percent corporate tax that these companies are already compliant with?

About Juma Fred

Juma Fredrick is an enthusiastic journalist who believes that journalism has power to change the world either negatively or positively depending on how one uses it. You can reach him on: (020) 528 0222 or Email: [email protected]

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