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Shifting tax policy worry industrialists

Mutwiri Muriithi @mutwirimuriithi

Cost of living could skyrocket with manufacturers and food processors warning of further escalation of commodity prices amid fears of new tax burden.

These concerns follow National Treasury’s warning of changes to the tax regime, with excise duty set to be reviewed annually and the rate pegged to the average rate of inflation for the past year.

Furthermore, an increase in food prices due to delayed long rains is also expected to  affect inflation rate as uncertainties continue over harvests.

East African Breweries Ltd (EABL) has already fired a warning shot that it would  increase the price of products if Treasury implements a proposal to raise corporate tax from 30 per cent to 35 per cent for firms with annual turnover of more than Sh500 million.

Francis Kamau, Partner and Tax Leader at Ernst and Young said National Treasury came up with a corporate tax draft bill but it has not reached cabinet yet, adding, however, that if at all it reaches that point and is passed, it will affect very many companies. “That is a very big margin. A hike of even one per cent is quite high,” he said.

Consequently, Kamau added, the hike will have a knock-on effect on various commodities if the other major manufacturers who fall within this tax bracket follow suit.

Kenya Breweries Ltd (KBL) managing director Jane Karuku warned Treasury, saying such a policy change would harm businesses, adding that a predictable tax regime is essential to guarantee growth of industry and economy.

Next budget

“An increase of taxes in the next budget would be a shock to businesses in Kenya and erode the gains made in increasing the ease of doing business,” she said. Kenya Association of Manufacturers (KAM) shared the same sentiments.

Speaking during the recently concluded manufacturers expo, Phyllis Wakiaga, the chief executive officer of  the business association called upon the government to foster a regime which is predictable so as to ease the cost of doing business.

She said a tax shock would be anti-business, adding that hiking corporate tax to 35 per cent would be among such shocks to businesses.

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