THE Institute of Certified Public Accountants of Kenya has proposed numerous tax cuts and scrapping of others to stimulate industrial growth and improve household earnings.
This comes because the Finance Bill 2025, presently underneath the public participation degree, suggests a flow away from the tax incentives which have previously distorted the market, with no clean output registered in the economy, in a tough balancing act by using Treasury that has visible it cross slow on implementing primary taxes.
Among taxes the accountants frame needs streamlined consists of VAT, corporate and excise tax on key domestically produced merchandise which they both ant reduced or absolutely eliminated.
In its submission to the National Assembly on the Finance Bill 2025, ICPAK recommends a discount of the company profits tax price from 30 in step with cent to twenty-eight per cent, saying it ensure Kenya aligns its tax charge with international and local traits.
Presently, the average global corporate tax price is 23.Fifty one consistent with cent, at the same time as in Africa, it is 27.28 in step with cent.
“…Enhance Kenya’s strategic position as an investment hub; and to discourage aggressive tax making plans and lobbying strategies geared toward reducing company tax legal responsibility, a discounted company tax rate could be useful and ecourage more taxpayers to voluntarily comply with their tax responsibilities,” ICPAK led by way of director Public Policy and Reserch Hillary Onami, Public Finance and Tax committee member FCPA Erastus Kwaka and the Committee convenor FCPA Robert Waruiru.
Further, noting that latest measures undertaken by the authorities to reinforce tax compliance, including eTIMS, have had less than premier effect on revenue collection, encouraging voluntary tax compliance can be the important thing to shoring up revenue mobilisation, it said.
Accountants additionally need the proposed creation of a five-year cap on deductibility of tax losses reviewed upwards to 15 years.
Currently, the regulation permits taxpayers to carry ahead losses indefinitely where its removal changed into based on introduction of minimal tax.
Tax loss bring forward is a tax provision that lets in firms to carry ahead losses from prior years to offset future profits, and, therefore, lower destiny profits taxes.
Since the modern exercise is that tax losses can be carried ahead indefinitely, introducing a 15-year cap would be greater reasonable for the reason that a number of the tax losses get up from the investment allowances legitimately furnished for underneath the Income Tax Act, in line with ICPAK.
“By the time the funding allowance is utilised completely, a company might have probable no longer exhausted the tax losses because five years is just too short for capital-intensive tasks,” ICPAK has noted.
It further wishes a framework put in place to implement the proposed Advance Pricing Agreements (APAs) for non-citizens to effectively promotes tax actuality and minimises disputes.
This is an in advance-of-time deal between a agency and a tax authority that predetermines the method for pricing transactions among associated events, which include one-of-a-kind branches or subsidiaries of the identical agency working in numerous countries.
If implemented, Kenya could join nearby counterparts along with Tanzania, Uganda, and Rwanda, which have already got provisions for APAs of their tax legal guidelines.
However, regional experience shows that simplest a restrained wide variety of APAs were finalized to this point, largely because of administrative capability constraints, uncertain processes and limited interest from taxpayers.
The Bill also proposes to amend the Income Tax Act by extending the length of approval of income tax exemption applications from 60 days to 90 days, with the institute recommending the contemporary provision retained.
It similarly proposes to repeal the preferential earnings tax charge of 15 in keeping with cent to groups that construct 100 residential gadgets.
On this, ICPAK recommends the retention of the modern-day provision within the Act saying the repeal of the motivation is going towards the housing time table which is a key monetary schedule underneath the Bottom-Up Economic Transformation Agenda (BETA).
“The proposed modification will disincentivise investment within the actual property region. The incentive was designed to encourage developers to construct at the least one hundred residential gadgets annually, helping Kenya’s low-cost housing agenda. Removing this incentive may also reduce the financial attractiveness of such initiatives, potentially main to fewer big-scale tendencies and slowing the deliver of less costly housing,” it said.
Other recommendations through ICPAK includes discount of VAT fee to fifteen per cent in first yr after which regularly to 14 in line with cent.
“The sixteen according to cent VAT charge within the modern harassed economic system and high residing value has no longer handiest reduced consumption tiers but additionally limited sales ability for the authorities. The medium-time period sales strategy anticipates an eventual decrease fee of 14 in keeping with cent to cushion the financial system and enhance buying energy after improved disposable earnings,” it stated.
To promote nearby industries, accountants want tax incentives on neighborhood car assemblers retained, excise obligation on locally manufactured articles of plastics removed to sell domestically industries and harmonisation of key tax rules inclusive of in health, power sectors and motorcycle assembly and elimination of excise responsibilities and other home taxes on locally produced or imported industrial inputs.
According to the KNBS Economic Survey 2025, the manufacturing area in Kenya experienced mild boom in 2024, with an boom of 2.8 in step with cent in comparison to two.2 consistent with cent in 2023.
The sector’s contribution to the Gross Domestic Product (GDP) stood at 7.3 per cent in 2024 down from 7.Five per cent in 2023.
Kenya Association of Manufactures has been calling for implementation of the National Tax Policy, that’s a part of the government’s efforts to decorate transparency in tax policies.
