Taxman allays fears on new VAT regime
The Kenya Revenue Authority commissioner general John Njiraini speaks to journalists during the African Tax Administration Forum at the Windsor Hotel Golf and Country Club in Nairobi on August 26, 2013. Photo/SALATON NJAU
What you need to know:
- Law which reduces number of goods exempted from levies will not hinder growth, he says
- Research shows that Kenya is losing about Sh100bn annually due to tax concessions
The taxman has dismissed concerns that the new VAT law will hinder economic growth and called for all future tax policies to be based purely on research.
Addressing the African Tax Administration Forum (TATF) in Nairobi on Monday, Kenya Revenue Authority (KRA) commissioner general John Njiraini was responding to fears that the new VAT law could slow down growth in certain sectors of the economy.
The now defunct tax exemptions and incentives, Mr Njiraini said, had crept in as the government sought to “assuage lobby groups” and were not always economically prudent. “Informed research can help governments avoid the pitfalls of going down the road of popular but inappropriate tax policies,” reads part of the speech by Mr Njiraini.
Earlier this month, President Uhuru Kenyatta signed into law the Value-Added Tax Act 2013 which drastically reduces the number of goods and services exempted from tax, or zero-rated, under the new regime.
In particular, Mr Njiraini said claims that 16 per cent VAT on mobile phones would slow down technology penetration in Kenya are not backed by evidence. He argued that the rapid growth of mobile phone usage has been driven more by falling airtime costs than cheap handset costs.
Phone manufacturers last week issued a joint statement warning that the new VAT regime would have a negative impact on mobile penetration. “There is little evidence or research to back up such concerns,” Mr Njiraini said.
The African Tax Administration Forum (TATF)brought together tax chiefs from across the region to discuss challenges facing revenue .
KRA wants any future tax concessions to be backed by research to prove that they would have a positive impact on the economy and the society.
Further, the Authority wants firms and industries that benefit from these concessions to be monitored to ensure that the promised benefits are delivered.
Research carried out by the Tax Justice Network and ActionAid indicated that Kenya is losing about Sh100 billion annually due to tax concessions and tax incentives.
About Sh12 billion of this was in trade-related incentives. At the same time, studies carried out by the World Bank have shown that tax incentives often have very little impact in attracting investment.
