Kenya’s tax rates are ranked among the highest in Africa with KRA tightened its noose around local firms, prompting them to close up. Statistics show that over about 2.2 million small enterprises have closed down over the last five years, underlining the tough challenges that the local business climate poses for investors.
The Revenue Authority has been in the spotlight for offering tax concessions or preferential treatment to some multinationals to incentivize them to set base locally and boost job creation, with little consideration for local companies.
The AU has urged Kenya to be fair in the distribution of its multibillion-shilling tax incentives among local and foreign companies to fast track industrialization and fight employment. That a double standard tax regime sets barriers on the growth of local firms and is a significant constraint on enterprise and investment.
“Many multinationals continue to enjoy a tax-free status in several other African countries, and I’m not against this, but the same regulations could also be granted to local industries. If internationals are allowed to come to the country and take profit it would be necessary to give the same benefits to local organizations,” said Ms. Ron Osman Omar, acting head of industry division at the African Union.
Yearly Kenya dishes out billions of shillings, mostly to foreign-owned export-oriented firms in the form of tax credits, deferrals, and exemptions. The government has even gone ahead in setting up of export processing zones and special economic zones aimed at promoting and facilitating export-oriented investments and to develop an enabling environment for such investment.
Since KRA went hard on tax-evading companies the revenues have increased in numbers over the last few years. Data from KRA reveals that the tax incentives have grown steadily over the years.