Civil Society Submission on The Kenya Draft National Tax Policy
The government of Kenya continues to grapple with domestic resource mobilisation challenges that have manifested in an increasingly tight fiscal space that limits public expenditure on crucial public goods and services like health, education and social protection among others. This has been attributed to the ensuing public debt sustainability problem and low tax revenue generation in the past.
The National Treasury developed the draft National Tax Policy aimed at realising the country’s dream of having an efficient and fair tax system that promotes equity in tax administration and a predictable tax environment for businesses to operate. The Policy provides policy recommendations to address various challenges currently facing the taxation regime in the country such as hard to tax areas, unpredictability of tax rates, low tax compliance and high tax expenditures.
In compliance with Article 201 of the Constitution, The National Treasury issued a notice to provide comments on the policy prior to finalisation. As such various Civil Society Organisations (ACEPIS included) under the Okoa Uchumi Coalition – an initiative of civil society organisations interested in Kenyan public finance managements issues, submitted an analysis of the draft National tax policy and proposals for improvement of the policy.
The Civil Society review of the draft national Tax policy identified among other issues the following for consideration by the national Treasury and other related MDAs. The issues include: i) There is need for the enactment of the Public Participation Act or for the development of public participation guidelines to enable effective stakeholder engagement as tax issues are cross cutting and are matters of national importance. ii) There is need for developing a feedback mechanism and clarifying who has the role and responsibility to acknowledge and address the feedback. iii) Tax exemptions should not be arbitrary and discretionary as this increases the scope for tax abuse and reduces government revenue. iv) There is need for special VAT rates for special categories of good like LGP, given the ripple effects this has on the economy and the potential to hurt low income earners.
Acepis urges government (National Treasury and KRA) to seriously consider these policy proposals to facilitate inclusion, accountability, equity, and efficiency of the country’s tax regime to promote economic justice.