Editorials

Time to rethink tax policies

times-tower

The High Court decision annulling the one per cent minimum tax on corporate sales, even when a company reports losses is a wake-up call for the Treasury to rethink its tax policies.

Justice George Odunga ruled while the government wanted to ensure companies that report losses as a tax-avoidance strategy over years also contribute to the exchequer, the policy is punitive for those that are genuinely losing money.

A tax policy cannot be based on punishing genuine businesses for tax leakages and evasion of rogue companies.

If the Treasury wants to catch tax evaders it should tackle the vice with more precision through targeted audits, IT and building the capacity of the Kenya Revenue Authority.

Kenya is looking to raise money to fund its Sh3.03 trillion budget but there is need balance between more revenues and negatively impacting already struggling businesses.

The KRA would have collected the Sh21 billion annually but at the risk of shutting the gates of struggling companies.

It was a bad policy especially in a year when many businesses have been affected by the Covid-19 pandemic and needed a bailout rather than being asked to pay for the little sales they had collected.

Overtaxation of the small informal sector by the government and unpredictability in the tax regime will have a negative impact on the economy.