- The tax burden ought to be distributed equitably amongst taxpayers
- The proposals captured in the Finance Bill 2021 will likely aim at two outcomes: widening the tax base and generating additional tax revenue.
Kenya’s 2021/2022 budget cycle is fast approaching.
Given the economic turbulence occasioned by the Covid-19 pandemic, Kenyan Mwananchi and the business community are eager for the announcement of policies, initiatives and programmes, inclusive of taxation measures, geared at supporting growth and recovery in the 2021/2022 budget cycle.
At these unprecedented times, the economic recovery of the country is crucial to besting the COVID-19 pandemic from an economic front. Kenyans are anxious to leave the experiences of 2020 and 2021 behind them and are anxious for prosperity ahead.
The 2021/2022 budget cycle will include a number of tax amendments, captured within the Finance Bill 2021, that aim to adapt the tax framework to the proposals and policies adopted in the 2021/2022 budget.
Primarily, it is expected that changes will be passed to the key legislations that govern Kenya’s tax regime, being the Income Tax Act, the Value Added Tax Act, the Excise Duty Act and the Tax Procedures Act.
Additional amendments may also be expected in the Banking Act, the Miscellaneous Fees and Levies Act, the Capital Markets Act, the Kenya Revenue Act and others.
The proposals captured in the Finance Bill 2021 will likely aim at two outcomes: widening the tax base and generating additional tax revenue.
It is notable that these two outcomes are linked to the extent that a wider tax base will automatically translate to increased tax revenue. This notwithstanding, we are in unprecedented times both globally and domestically.
In order to reverse the economic losses experienced over 2020 and Q1 2021, it is imperative that policies geared at supporting economic growth, as opposed to squeezing every penny from Mwananchi’s pocket, take centre stage.
This will require a tight balancing act by the Cabinet Secretary, National Treasury as he aims to finance Kenya’s largest budget, reportedly clocking in at Sh3.6 trillion, whilst simultaneously introducing measures that increase cash in Mwananchi’s wallets, thereby spurring consumer spending, and enable businesses to reap profits that will be reinvested in growth and expansion strategies.
The key to achieving the above is a realignment with the classic canons of taxation: equity, certainty, economy and convenience.
The tax burden ought to be distributed equitably amongst taxpayers, certain in application and enforcement, devoid of unnecessary administrative costs and delays and efficiently applied.
It is lauded that the Kenya Revenue Authority in some instances attempts to adhere to these principles, particularly with reference to the numerous stakeholder engagement initiatives conducted by the revenue authority to educate the public on the tax regime applicable in Kenya.
However, more can be done to ensure that tax-raising mechanisms pursued by the revenue authority do threaten growth and development but rather remain sustainable in the long term.
Indeed, the revenue authority and taxpayers are not enemies but rather collaborators geared toward a common purpose – Kenya’s economic success.
Karen Kandie – MD IDB Capital