Kenyan firms bear heaviest tax burden in East Africa

The report uses indicators such as ease of starting a business, obtaining construction permits, registering property, and accessing credit as parameters of measurement.

Other indicators used are protection of investors, paying taxes, enforcing contracts, and the ease of closing a business.

Ms Otonglo, while alluding to the various tax reforms being implemented in the country such as online filing, she indicated that the administrative burden of compliance remains the biggest challenge to traders.

“The ongoing reform programme needs to consider the use of smart regulation which entails the use of one tax regime per base and simple tax administration.”

A one tax base regime is applicable where all other tax levies other than income tax are lumped together and charged as one.

Under such a regime, levies like social security, fuel tax, land rents and rates, and training and business permits are lumped attracting a single charge.

Other proposed measures under the smart regulation are to widen the tax net to increase the number of businesses paying tax.

This is expected to lead to a review of tax charges as hence further raising the compliance level.

Widening the tax base also offers the country the means to offset potential revenue decline from the ongoing global economic recession that has eroded profitability in all segments of the economy.

“The global recession has meant falling tax revenues and difficult tax policy choices such as raising tax rates will worsen the situation hence the need to bring more tax payers into the tax bracket,” said Rajesh Shah a Tax partner at PwC.

To counter the declining revenues, KRA spanned off a Medium Tax Payer Department from the Domestic Tax Department to cater for the Small and Medium Enterprises (SMEs).