EDITORIAL: Tax relief welcome but more still to be done

Monday February 11 2019

Attorney General Adelarrdus Kilangi

Attorney General Adelarrdus Kilangi 

The government has made some positive changes to the extant taxation regime in a rare mid-fiscal year review via ‘The Written Laws (Miscellaneous Amendments) No. 2 Act of 2019’, tabled by Attorney General Adelarrdus Kilangi and passed by the just-ended parliamentary session on Saturday.

Laudable though the changes are, they nonetheless are too few to positively impact the economy massively. To do that, the relevant authorities – especially the government – must revisit the taxation regime in its entirety, doing so in consultation with all stakeholders across the board.

The recent changes see to reductions in tax rates, as well as revocation of some taxes – thereby bringing much-sought relief to taxpayers at both ends of the socio-economic spectrum: producers of taxable goods and consumers/end-users thereof alike.

For example, the government has revoked the 5 per cent withholding tax that was levied on small miners, and has zero-rated the value-added tax on the supply of gemstones and other precious minerals by small miners.

It has also reduced the excise duty on spirituous liquors made from locally-produced grapes from the current Sh3,315 down to Sh450 per litre: a 736 per cent reduction!

This is to encourage distillers to use locally-grown grapes – thus making their products more competitive at the marketplace, as well as promoting/supporting domestic grapes-farming.

The general view is that the changes – limited as they are to small-scale mining, liquor production and property tax – are not enough to erase the long-standing image that our taxation regime is not business-friendly enough to induce a flood of investments, especially foreign direct investments (FDIs).

Therefore, more still needs to be done to address the concerns that are widely shared over the negative impact of the fifth phase government’s tax burden.