IMF pushes for an overhaul of tax systems

By LUKE ANAMI

Finance Minister Uhuru Kenyatta is likely to propose radical changes in taxation structure to accommodate views by the International Monetary Fund (IMF).

The fund has proposed an overhaul of the tax systems through streamlining administrative processes and modernising payment systems, and reduction of tax, a point of focus yet to be factored in by Treasury. "Tax authorities worldwide are overhauling tax systems by reducing taxes, streamlining administrative processes and modernising payment systems," according to Paying Taxes 2009 report.

The Bretton Woods institution also wants the Government to develop new tools that would help to contain the high inflation now considered a cruel form of taxation. Paying Taxes 2009 is an annual report published by the World Bank, IFC and PricewaterhouseCoopers. It shows that the Kenyan ranking for ease of paying taxes dropped from 154 out of 178 economies in the previous year to 158 out of 181 economies.

Perceived decline

"Some of the reasons for this perceived decline is the tremendous improvements made by other global economies compared to Kenya," says the report in part.

This, coupled with, a tax system riddled with multiple tax payments each month, slow tax refunds and a tax net that is not wide enough means that Kenya has further work to do to improve their ranking. Key among economic proposals that Uhuru is expected to deliver is the reduction of a high inflation rate that has been largely responsible with the erosion of the consumers purchasing power. "The inflation and inflexible tax regime have pushed the cost of living to the roof," Mr Polycarp Igathe, the Managing Director of Haco industries said. "The Finance Minister should reduce taxes on power to further lower the cost of business in order to inspire jobs creation," he said.