Treasury Cabinet Secretary Ukur Yatani. FILE PHOTO | NMG The government should consider reviewing the one percent minimum tax imposed on business, especially in this tough economic environment.
As is evident, most firms are grappling with the economic fallout of the Covid-19 pandemic. A second round of restrictions on movement has thrown some companies into financial uncertainty.
Business closures in the entertainment and tourism sectors have resumed.
Many firms have already been forced to implement tough cost cutting measures due to the Covid pandemic.
The minimum tax will eat into their cash flows, risking more closures and job losses in an economy that is already struggling to employ young people.
The tax law does not take into consideration sectors that experience low profit margins but have a tradition of paying their taxes, as opposed to the perennial loss-making companies that are the actual target of the new levy.
Treasury Cabinet Secretary Ukur Yatani should review the law and give struggling firms a reprieve just like he has done for Kenya Airways (KQ).
In a Kenya Gazette notice dated March 17, Kenya Airways is exempted from paying the minimum tax set at one per cent of gross turnover, saving the cash-strapped airline hundreds of millions of shillings annually.
The government is the largest shareholder in the national airline.
Other loss-making firms will not be so lucky as the minimum tax is designed to ensure that each company pays either the new levy or normal corporate taxes, whichever is higher.
It is the role of the government to ensure the business environment favours private investment and to spur development.Businesses and individuals have the responsibility to pay taxes to enable the government deliver public services.However, this should not be done at the risk of killing firms that provide employment and livelihoods to many individuals and households.The pandemic has suppressed government revenues and it is right to find new revenue streams to fund the annual budget. The Treasury should do this in a way that will not kill private ventures.
