Rédaction Africa Links 24 with Kenyans.co.ke
Published on 2024-02-27 16:33:26
The National Treasury recently announced its plan to reduce the corporate tax rate in Kenya from the current 30 percent to 25 percent. This move is part of the government’s efforts to attract more investors to the country and stimulate economic growth.
Corporate tax is levied on the profits earned by companies over a specific period, calculated as gross income minus gross expenditure. The reduction in the tax rate is expected to serve as an incentive for foreign investors looking to establish operations in Kenya. Currently, Kenya’s Corporate Income Tax (CIT) rate stands at 30 percent, which is higher than the global average of 23 percent and the African average of 29 percent.
The high corporate tax rates in Kenya have led to some multinational companies leaving the market in recent years. Studies have shown that high tax rates can discourage foreign direct investments and lead to lobbying for lower rates or tax exemptions. Additionally, high tax rates can result in increased tax planning and reduced compliance by taxpayers, which may contribute to a decline in income tax revenue as a share of GDP.
In comparison to neighboring countries such as Tanzania and Uganda, whose corporate tax rate is at 30 percent, Kenya’s move to lower the tax rate could help regain its competitive edge in attracting investments. Rwanda recently reduced its tax rate from 30 percent to 28 percent in a similar effort to attract investors.
Deputy President William Ruto has been actively engaging with billionaires and large multinational companies to encourage them to invest in Kenya. This strategy aims not only to boost economic growth but also to create job opportunities for the youth. Several prominent companies, including JP Morgan, PepsiCo, the Bill & Melinda Gates Foundation, and TikTok, have expressed interest in establishing a presence in Kenya.
It is crucial for Kenya to enact favorable tax policies to attract investments and spur economic growth. By lowering the corporate tax rate, the government hopes to create a more conducive business environment for both local and foreign investors. This move could potentially lead to an influx of new investments and job opportunities, laying the groundwork for sustained economic development in the country.
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