Title : Change tax policy, Icpak urges State
Change tax policy, Icpak urges State
Article business, Business Daily Kenya:
National Treasury has been told to shift from emphasis on direct to indirect taxes to capture a larger proportion of the population who do not contribute to the revenue net. Currently, only 1.6 million Kenyans are registered as taxpayers by Kenya Revenue Authority.
Naomi Rono, a policy and governance officer at the Institute of Certified Public Accountants of Kenya (Icpak), says a shift from direct taxes would have beneficial effects on employment and economic growth.
According to an ICPAK study, income tax contributes over 90 per cent of the revenue collection in Kenya. “This analysis indicates that only 30 per cent of the urban population is subjected to direct taxes,” says Rono.
She says Kenya’s indirect taxes have yielded the lowest proportion of revenue in national income compared to income tax. “Kenya’s consumption taxes are designed to exclude the population with the lowest disposable income from the tax net,” says Rono.
The government is in the process of reviewing the Income Tax Act to embrace best practice and align it with the changes in the business environment. The Act was enacted in 1973 and became effective on January 1974.
National Treasury Principal secretary Kamau Thuge has called on the public to give submissions on how to improve income tax administration, deepen and broaden the tax base and simplify the income tax regime to ensure transparency, revenue productivity and efficiency.
Rono says, in addition to widening the tax brackets, income tax policy needs to prioritise broadening of the tax base through targeted policy measures to include the informal sector and prevent adverse labour incentives.
Icpak wants the Treasury to develop a policy framework on Income Tax Act first before it embarks on the review. “The policy framework will help unlock many issues revolving around the current taxation system and shift revenue reliance away from direct taxes as witnessed in the past,” says Rono.
Kenya Investment Authority chief executive Moses Ikiara admits that the policy development process will allow holistic and inclusive discussions from all stakeholders.
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