Kenya National Chamber Of Commerce and Industry wants government to increase its tax base to over 50 per cent instead of overtaxing products.
Kenya Revenue Authority statistics indicate that the possible taxable target stands at 19 million Kenyans but only about 16 per cent equivalent to 3.2 million taxpayers remitted taxes by June 2018.
KNCCI chairman Kiprono Kittony said the 16 per cent VAT will revert growth of the economy that has seen a recovery in the past year.
“The 16 per cent VAT on fuel products will increase production costs therefore slowing down the manufacturing sector,” he said.
The 16 per cent VAT on petroleum products included in the Finance Bill 2018 has already started attracting a Sh17 increase in price of every litre of fuel. The government expects to raise Sh70 billion following its implementation to the Sh3.4 trillion budget to facilitate development projects under the Big Four agenda.
Even as parliament suspended the implementation until 2020, Kenyans are waiting to see if President Uhuru Kenyatta will rise to the legislators’ call.
“The government should rethink its options for financing development and expenditure instead of overtaxing products that already bare large tax burdens. The VAT on fuel products will have an inflationary effect on prices since every product has a transport component of pricing,” he added.
The taxman collected Sh1.48 trillion in the year ending June 2018 against a target of Sh1.74 trillion on ordinary revenue. After all the revenue was accounted for, there was still a budget deficit of Sh562 billion.
KNCCI urged the government to repay Sh220 billion debts owed to the local suppliers, service providers and contractors.
“The repayment of local firms will inject the required liquidity into the private sector and spur economic growth,” he said.
Kittony further added that the 30 per cent of the debt owed, equivalent to Sh66 billion is payable as corporation tax by the contractors.
“This amount brings the revenue close to the Sh70 billion government aims to collect,” he said.
He said that this should be integrated by netting VAT refunds with debts it owes to its suppliers.
“Many businesses have been forced to take loans to settle KRA debts when the same government owes them a lot of money. The government should deduct and resolve the tax claims,” Kittony said.