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KNCCI wants State to widen tax base, stop 16pc fuel tax

The government has been advised to widen its tax base and curb losses to corruption so
as to remove the need for valued added tax (VAT) on petroleum products.

Kenya National Chamber of Commerce and Industry (KNCCI) said 16 per cent VAT
imposed on fuel would negatively affect the economy and reverse growth recorded in the
past year.

“There is the need for the government to widen its tax base and ensure more than 50 per
cent compliance rate instead of relying on less than 17 per cent potential taxpayers or
3.2 million Kenyans compared to over 10 million working Kenyans,” Chairman Kiprono
Kittony said in a statement.

He urged the government to reduce public spending and wastages to save billions of
shillings that are lost yearly, adding: “The government should focus on reducing its
bloated administration by eliminating unnecessary positions”.

“KNCCI is of the view that the government needs to merge parastatals to reduce costs
and increase efficiency as well as review administrative positions in county
governments,” Kittony said.

He asked the government to adopt a ratio of less than 30 per cent of its recurrent
expenditure to total budget and contain corruption which has remained a thorn in the
flesh of taxpaying Kenyans.

According to a report by Ethics and Anti-Corruption Commission in 2016, Kenya loses a
third of its national budget — about Sh666 billion — to theft and wastage every year.

Kittony said as the business community, the time has come to say enough is enough
and demand that action be taken to recover lost monies and halt any further bleeding.

The private sector body lauded President Uhuru Kenyatta’s resolve to fight corruption
but said: “There is need to have stringent laws and regulations to prosecute corrupt
individuals with longer jail terms and stiff penalties to deter any potential acts of
corruption”.

Kittony called on the government to incentivise the small and medium enterprises
(SMEs), ring-fence the informal sector and reduce value-added taxes to boost economic
growth.

“The government should invest more in the provision of utilities and infrastructures that
are beneficial to the private sector and are productive to facilitate more business,” he
said.

In particular, he added, the high costs of electricity, fuel and business permits need to be
addressed to allow the private sector to grow by eliminating high operational costs.

On domestic debt, the KNCC chairman said the government must repay about Sh220
billion owed to local suppliers – which is key to injecting the required liquidity into the
private sector and acts to spur economic growth.

“Of the debt owed by government to contractors, 30 per cent is the corporation tax
payable to it that can yield the Sh70 billion KRA seeks to collect. The government should
also reduce number and percentages of VATs on goods to attract external investors, improve competitiveness for businesses and lower the cost of goods for people,” he said.

Kittony urged the government to consider netting VAT refunds with debts it owes
suppliers.