Auditors seek speedy income and other tax reforms to raise levies
The Institute of Certified Public Accountants of Kenya (ICPAK) is pushing the government to broaden the tax base partly by fast-tracking income tax reform.
The call follows a study conducted by the institute analysing revenue growth as well as tax revenue yield between 2010 and 2015. It was meant to inform budget planning and monitoring process in the country.
“Our analysis has indicated that tax revenue contributes over 90 per cent of the revenue collection in the country…and is the largest contributor to the tax revenue basket,” said ICPAK chairman Fernades Barasa on the sidelines of an ongoing annual internal audit conference in Mombasa.
“The Cabinet Secretary [Henry Rotich] in the budget statement for 2015 identified the review of the Income Tax Act as a priority reform to be completed by September 2015. It is our considered view that any delayed review will affect the realisation of revenue targets.”
The institute said the law review should be supported by effort to implement policies to deliberately shift from direct taxes towards indirect levies to fund expenditure.
The ICPAK said a shift from direct taxes would have a positive effect on employment and Gross Domestic Product (GDP) growth even if overall revenue levels remain constant.
This will also ensure that a larger proportion of the population contributes to taxation as consumption increases.
It recommended that a graduated Value Added Tax (VAT) approach be applied to simplify administration and enhance progressiveness of the tax, saying this is the preferred approach in most of the European Union (EU) countries.
It proposed that VAT be applied at different rates with luxury goods being taxed at as high as 130 per cent.
