Experts urge consistent tax policy in upcoming budget

Former Senate Finance and Budget Committee chairperson Billow Kerrow. [Screen grab]

Financial experts have called on Treasury CS Njuguna Ndung'u to align the upcoming budget with current tax policies to bolster investor confidence.

Billow Kerrow, a political economist and former Chairperson of the Senate Finance and Budget Committee, cautioned against erratic tax policies that could drive investors to more tax-friendly nations, relegating Kenya to a less profitable distribution role.

"Businesses leave or shut down when the cost of doing business becomes prohibitive, making them less competitive. Taxation is the greatest contributor to these exits," Kerrow explained.

He also recommended that the government heed the advice of business groups and professional bodies that have contested certain aspects of the Treasury's proposals.

"Throughout the budget-making process, the government engages with businesses. These businesses engage extensively with the National Treasury even before the Finance Bill is drafted. However, political expediency and mismanagement of government force the government to go contrary to what is agreed upon with the businesses," Kerrow observed.

Solomon Kihang'a, a tax specialist at KPMG, stressed the importance of tax predictability for business planning.

"One canon of taxation is certainty. A predictable tax policy will enable a business to know whether it will exist in five years' time or otherwise. That's what our tax policy says on paper, but the finance bill contradicts it," Kihang'a said.

He further noted that last year's reduction in excise duty on money transfers from 20 per cent to 15 per cent was a positive step towards financial inclusion and secure money movement.

However, the Finance Bill 2024 has reverted the rate to 20 per cent, undermining the predictability needed for business planning.