It is now widely accepted that Public Private Partnerships (PPPs) are necessary to ensure that the country’s developmental targets are met. Through PPPs, Kenya can leverage the private sector’s experience and efficiencies to ensure that projects considered beneficial to the public are actualised. This is particularly important in the face of the current government’s Big Four Agenda. Through PPPs, it is expected that the four pillars of the Big Four Agenda, that is, affordable housing, universal healthcare, food security and manufacturing, will be effectively delivered to the public.
However, to take advantage of PPPs, it is imperative that a conducive investor friendly environment is nurtured. This includes, but is not limited to, the underlying tax environment. It is not in doubt that clear and predictable legislation, inclusive of tax legislation, will attract investment by enabling investors conclude investment decisions with levels of certainty. Clarity and predictability not only boost investor confidence but also ensure transparency and accountability on both sides of the isle.
In the pursuit of clarity and predictability of the taxation environment, it is important that cohesiveness amongst government institutions is achieved. Under the current environment, it is all too common that promises made by one state institution are not adequately considered by other government institutions in the decision-making process. This tends to leave the private sector players in positions of uncertainty, which do not bode well when making investment decisions.
This is particularly evident in scenarios whereby the executive arm of the government enters into bilateral and multilateral trade agreements whereby various taxation incentives are offered, but the same are not reflected in the prevailing tax legislation. This leaves the Kenya Revenue Authority (KRA), tasked with enforcing tax legislation, at a crossroads – unsure whether to enforce the law as enshrined in the various pieces of legislation, or to adhere to government policy, as may be promoted by the Executive.
While it is understandable that government policy may not immediately translate to enforceable legislation, it is imperative that any time-lag between the two is acted on as fast as possible. This will ensure that what is preached, and what is practiced, are in sync.
Further, reduced lag between policy and enforceable legislation not only attracts both foreign and direct investment, but also ensures that taxation leakages are dealt with as and when they arise. This is more relevant in the case of foreign direct investment. Currently, the narrative is increasingly being shaped by warnings that large multinational entities are robbing Africa dry, with the OECD noting that Africa is losing billions of dollars in illicit financial flows. More than anything, this is a call to strengthen our institutions and business practices with a view to reduce and altogether eliminate such illicit flows.
Karen Kandie
