Tax experts are against the introduction of another tax band at the rate of 35 percent as proposed in the Draft Income Tax Bill 2018 and are instead rooting for expansion of the tax base to include the informal sector.
PKF Kenya Tax Partner Michael Mburugu argues that the prosed amendments in the income tax law are likely to make Kenya less attractive to investors against a backdrop of reducing tax rates in other countries, and that the current tax regime has overlooked the informal sectors’ revenue potential.
Mburugu argues that under the current tax regime, most of those in the informal sector remain untaxed yet the sector contributes 34% of Kenya’s Gross Domestic Product.
Instead of reviewing upwards the corporate tax from 30 to 35 percent, PKF Kenya proposes that the National Treasury should reduce corporate tax to 20 percent to make Kenya attractive to investors.
As the foreign income tax amnesty period comes to a close end of this month, the firm is proposing that it be extended and the same offered locally on the on iTax platform to help more people volunteer to join the tax bracket.
They urged the government to leverage on iTax and e-Citizen platforms to profile Kenyans and impose tax obligations on all citizens however small, noting that this would reduce the tax burden which is currently shouldered by salaried staff and big companies.
The tax experts warned that corruption could be a major hindrance to the achievement of the Big Four Agenda as well as economic growth in the long term.