• The current corporate tax rate applicable in Kenya is 30 per cent in the case of resident corporations such as limited liability companies.
• A tax cut would improve compliance, efficiency and tax administration, while at the same time creating a conducive environment for businesses to grow.
The government should reduce corporate tax to 20 per cent for a three year period to boost business in the country, PKF has said.
PKF Kenya partner David Kabeberi said this will enable companies to re-invest money saved from taxation back into their businesses.
“It is obvious that many middle and large sized companies are struggling to keep afloat due to sustained adverse economic climate in the last three years,” he said.
The current corporate tax rate applicable in Kenya is 30 per cent in the case of resident corporations such as limited liability companies.
A non-resident company with a permanent establishment in Kenya is taxed at 37.5 per cent. The tax is computed on the taxable income of a company, having deducted expenses which are wholly and exclusively incurred in the production of income.
There are preferential tax rates available for newly listed firms pursuant to which the tax rates range from 20 per cent to 27 per cent for a period ranging from three to five years.
“The government should put in place tax measures to improve compliance, efficiency and tax administration, while at the same time creating a conducive environment for businesses to grow,” PKF tax consultant Michael Mburugu said.
He added that property prices in the country were soaring on a daily basis, further hurting taxpayers slapped with a huge tax burden when it comes to Capital Gains Tax, since the current tax provisions do not allow for indexation.
“It is high time that the government considered introducing adjustments to cater for inflation and time value of money when computing CGT since the high taxes resulting from CGT affect the pricing of property,” he said.
PKF is called for tougher measures to control rising corruption cases and public debt in order to stimulate economic growth.
In its pre-budget briefing, PKF proposed that government rebuild its capacity to fight corruption by focusing on long term projects.
“There is a need to urgently rebuild the capacity of the Government to implement projects and prevent corruption and to do this it will be necessary to stop all projects, take stock and close the taps,” Kabeberi said.
He lauded the recent currency demonetisation of the Sh1,000 notes aimed at addressing graft in money deals and locking out the cash that is unaccounted for.
In light of this, PKF has proposed a local tax amnesty at a preferential rate of principal tax.
“A local tax amnesty would be a golden opportunity for the government to collect tax and also widen the tax net since many persons would be attracted to take this up,” he said.