KENYA—The Kenya Association of Manufacturers (KAM) warned during a public participation forum that the proposed tax hike in the Finance Bill 2024 would stifle the manufacturing sector.
KAM Chief Executive Anthony Mwangi warned that proposed excise taxes on manufacturing inputs would choke the sector, which is a primary driver of exports and employment in Kenya.
KAM argues such taxes would be transferred to consumers, which would have a ripple effect on prices and demand. KAM described the proposed tax increments as ‘overburdening’ and ‘unreasonable.’
Mwangu faulted the government’s decision to increase excise taxes, describing it as myopic.
He said, “Over decades, because of short-term goals, these decisions have been made without a 360 view of the economy. The cost of doing business will go up by 20 to 30 per cent, and we will not be able to export.”
“If the production engines are not running at optimal speed, this country will not create jobs and revenue. Let us not throw away what has been built by sticking to this proposal.”
KAM executives argued the proposed tax increments would cause players in the manufacturing sector to either close shop or move to neighboring countries.
The executives also faulted the proposed tax collection policies in the bill. Fredrick Kimotho, a senior tax expert with Deloitte, argued the bill’s proposal to grant the Kenya Revenue Authority (KRA) powers to collect taxes from players indebted to any taxpayer would be detrimental to the business environment and stifle economic growth. Kimotho called for the deletion of this proposed provision.
Philip Kakai, Chairman of the Institute of Certified Public Accountants, said, “Over-reliance on salaried employees and a limited pool of taxpayers underscore the importance of expanding the tax base to encompass diverse sectors, including the informal economy, to foster economic inclusivity and sustainability.”
The executives argued that the government’s primary focus should be on prioritizing and reducing expenditures. They faulted the government’s failure to implement economic appraisal in capital expenditures, which would help reduce the tax burden on the economy.
The proposed taxes come at a time when the retail and consumer goods market struggles with high inflation.
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