Look beyond friendly taxes to win investors

Workers at an Export Processing Zone. While under Export Processing Zones Act (EPZ Act) the activities of EPZ enterprises are limited to manufacturing, commercial and service activities, the SEZ Act provides a long non-exhaustive list of activities. Photo/FILE

Kenya should look beyond offering preferential taxes in the push to attract more investors.

While it is a welcome proposal for the country to eye an increased licence period for Special Economic Zone (SEZ) firms from one year to 10, it should not be lost on the authorities that these zones already enjoy many other preferences.

The major selling points for SEZs in Kenya have for long been the tax shields. Such firms benefit from various tax rebates such as exemption from excise duty, customs duty, value-added tax and stamp duty, in addition to a lower tax rate in the first 20 years.

These incentives are attractive enough when compared with the general trade, tax, and investment rules for businesses outside SEZs and the failure to see much activity in these zones should send policymakers back to the drawing board.

Many State sponsored SEZs, which were to be used to showcase endless possibilities in these zones, have faced funding challenges resulting in delays in the development of infrastructure needed to attract investors.

There has also been a lack of clarity on the SEZ laws and delays in gazetting and operationalising them, discouraging potential investors and stifling opportunities.

The government should address challenges such as expensive power and other sea-sawing policies that are a headache for businesses.
Regulatory and legislative issues around labour, logistics, and governance should be a priority in cushioning all the investors.

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