Bad News To Kenyans As IMF Wants Tax Exemption To Be Removed

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IMF wants more taxes on Kenyans after claiming Kenya’s tax revenues have steadily fallen since peaking at 15.5% of GDP in 2014 and touched a low of 13.1% of GDP in 2020.

The IMF want’s tax exemptions removed.

Incentives and exemptions handed out in recent tax legislation include the reduction of the corporate income tax rate from 30 to 15 percent to real estate developers putting up at least 400,000 housing units in a year of income.

In 2016, motor vehicles purchased or imported for direct and inclusive use in official aid and funded projects were exempted from VAT. Most recently in 2023, aircraft parts were exempted from VAT, having previously attracted VAT at the standard rate, while developers of hotel buildings and buildings and machinery used in manufacturing were cleared for a 100 percent investment deduction.

Bulk storage and handling facilities supporting standard gauge railway (SGR) operations were also qualified for a 150 percent investment deduction. Last year’s move to cut taxes for local branches of foreign companies has also resulted in reduced liabilities for the firms, which have saved billions in the process.

US power generating company Ormat Technologies Inc., for instance, disclosed a tax benefit of $9.4 million (Sh1.5 billion) after the reduction of its corporate tax rate from 37.5 percent to 30 percent.

American Tower Corporation also reported tax savings from the incentive. The tax savings made by the foreign firms have come amidst backlash of mounting taxes and levies on Kenyans, including increased payroll deductions which have been matched by employers.

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