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Economy

Treasury in bid to scrap tax incentives for industrial parks

National Treasury building
National Treasury building. FILE PHOTO | NMG 

Investors setting up premises on more than 100 acres of industrial park land outside Nairobi and Mombasa will have to dig deeper into their pockets if Parliament approves a Bill seeking to scrap waiver on payment of import declaration fees on raw materials.

Through the Finance Bill, 2020, the Government has also sought to strike out Treasury Cabinet Secretary’s power to exempt raw materials used in the construction of premises at the industrial parks.

The Bill seeks to delete section XXII of Part A of the Second Schedule to the Miscellaneous Fees and Levies Act, 2016 that empowers the Treasury to exempt “any other goods as the Cabinet Secretary may determine are in public interest, or to promote investments valued at not less than Sh200 million.

Also to be deleted is a section that allows the Cabinet Secretary to approve waivers on payment of import declaration fees by industrial park investors.

The changes are set to hit those eying industrial parks such as Naivasha where more than 100 local and foreign investors had by November last year expressed interest in setting up shops.

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The Government in July last year, designated 9,000 acres of land in Naivasha, Mombasa and Machakos as Special Economic Zones (SEZs), as it stepped up efforts to boost manufacturing.

The Finance Bill, 2020, which is currently before Parliament, comes at a time that the taxman has thrown its weight behind the Treasury’s bid to scrap tax subsidies that denies the State up to Sh60.3 billion each year.

Kenya Revenue Authority said allowing investors to deduct taxes when they set up plants and machinery, buy land or export costs the country more than the benefits accrued.

The Government plans to either scrap some subsidies on capital expenditure or delay the benefits in the Tax Laws (Amendment) Bill, including scrapping the 30 percent refund on electricity cost.

Last September, the taxman told Parliament that the cost of tax incentives that Treasury gives companies and individuals rose to a high of Sh478 billion in 2017 alone. KRA has recommended removal of deduction allowance, industrial building allowance, deductions on mining, capital, agricultural land, import duty set-off and unit trusts investment vehicles. KRA also called for export-related exemptions to be scrapped including the tax holidays offered to Export Processing Zones (EPZ) and Special Economic Zones.

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