Manufacturers are quitting Kenya for other countries in the region over unplanned tax changes by the Kenya Revenue Authority as the government steps up collection of revenues.
Stanbic Bank East Africa economist Jibran Qureishi said industrial projects approved by the government have been falling consistently for the last four years, even as Uganda with two new hydropower projects and Ethiopia offer cheaper power prices.
Mr Qureishi, who interviews manufacturers to gauge the health of private sector, says if the government does not sort out its finances it is likely to resort to new taxes that would make setting up business in Kenya unpredictable.
“When you talk to the sector, they bring up things like arbitrary assessment on taxation, they want the business environment to remain sound, no harassment.
“We do the PMI and I hear panelists talk about that quite a bit, we do not put it out every month but that is always consistent in terms of the narrative that points out what they are concerned about,” Mr Qureishi said.
“If we do not sort out our fiscal issues, we are going to have a very unpredictable taxation regime, which will not just entail arbitrary assessment but also taxes that would hamper productive sectors,” he said.
A multiagency team led by KRA has initiated a crackdown that has led to closure of many businesses after import cargo was detained for tax assessment and prosecution of company owners suspected of tax cheating.