The government is proposing a tax plan that would slash the corporate rate to 25 per cent from the current 30 per cent for small-sized enterprises in a bid to spur growth.
East African Community (EAC) and Regional Development secretary Adan Mohamed says his ministry will initiate talks with the Treasury on the proposal to boost the fortunes of SMEs regionally and enhance compliance.
“Most economies globally and in the region have small business tax rate of between 20 to 25 percent. But in Kenya our 30 percent corporation tax is for everybody which affects compliance for small and medium enterprises,” said Mr Mohamed.
“Our economy is largely made up of large to small sized enterprises and if you cut the rate you will get more compliance and also contribute to improving business environment and making Kenya much more competitive,” he added.
This comes as the taxman on Tuesday asked millions of small traders to immediately pay a newly introduced presumptive tax (based on licence cost) that kicks in from January or risk not getting business permits renewed. The new tax is expected to burden petty traders, who have raised concerns about deteriorating business conditions, with additional operating costs.
About 2.2 million small enterprises have closed shop in the past five years, according to a 2016 government report, underlining the challenges local business climate poses to small traders.