Promoting Equity, Fairness, And Justice In Taxation For Kenyan SMEs And Ensuring Parity With Foreign Firms; The Pesapal case
KEY POINTS
Equitable taxation policies not only benefit local SMEs but also contribute to regional competitiveness. When African governments, including Kenya, demonstrate fairness and justice in taxation, they set a positive example for other countries in the region.
KEY TAKEAWAYS
Equitable taxation policies can help reduce income inequality by ensuring that the tax burden is distributed fairly among all businesses. This promotes social justice and addresses the disparities between local SMEs and foreign firms.
I have always been and will always be Pro-SMEs because this is where the magic and this is where innovation takes place. This is where the best training for future CEOs, Managers, and Leaders is molded.
This is where the essence of learning about entrepreneurship happens. Of late, many SMEs in Kenya have been getting demand letters from KRA, especially if they are now big and are competing with other peer firms of foreign origin.
The case of Pesapal and the KRA demand got me thinking about why it is important for Entrepreneurs to come together and have an AA kind of group but for entrepreneurs to support each other.
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This is a matter that should be on the floor of parliament. Thousands face unemployment. This riled me up so much that I decided to read and research some more on what SMEs are going through in Kenya.
In the context of globalized economies, the issue of equity, fairness, and justice in taxation becomes crucial for small and medium-sized enterprises (SMEs), particularly in developing countries like Kenya. While governments strive to attract foreign investment, it is equally important to ensure that local SMEs are not burdened with unfair tax policies.
I am a Champion for SMEs. I am a Pro business. I am pro-positive Government policies BUT am for honest and real conversations around issues that affect us greatly. Why the Kenyan Government and its agencies need to be fair and very supportive of the SME ecosystem is very simple. Even my young son understands why it’s important to support SMEs, hence I expect the government to, but I could be wrong, given the decisions they have been making of late.
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Here is why;
Encouraging Local Entrepreneurship:
Promoting equity in taxation means treating local SMEs on par with foreign firms. By providing a fair tax environment, the Kenyan government can encourage local entrepreneurship, allowing SMEs to thrive and contribute significantly to economic growth. If a startup is pushed into bankruptcy, as a country, we will lose so much in terms of knowledge, tech transfer, and innovative ideas when its employees will be rendered redundant.
Creating a Level Playing Field:
Tax policies should aim to create a level playing field for all businesses. When foreign firms enjoy tax advantages over local SMEs, it distorts competition and hinders the growth potential of domestic enterprises. Pesapal deserves the same treatment other peers got during COVID-19 because that is only fair and right.
Fostering Investor Confidence:
Treating local and foreign firms equitably in taxation builds investor confidence, attracting foreign direct investment while reassuring local SMEs that they will not be unfairly disadvantaged. Given that SMEs run the Kenyan economy, then it’s only fair to protect them and seek solutions that give them the opportunity to grow.
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Enhancing Tax Compliance:
When SMEs perceive tax policies as unfair, they may be more inclined to engage in tax evasion or avoidance. By implementing equitable taxation practices, the Kenyan government can enhance tax compliance and revenue collection.