Webinar Review: Introduction of Minimum Tax in Kenya, Convened by Kenya Association of Manufacturers

The finance bill 2020 introduced minimum tax that was (is) implemented on January 2021. The minimum tax states that you will be taxed 1% of gross turnover annually. Minimum tax targets three categories of businesses, namely: low margin businesses, capital intensive businesses and new businesses. The webinar explained how minimum tax works and the concerns that it raises given that its introduction comes when the country’s economy has been ravaged by the corona virus pandemic. Minimum tax in Kenya is to be paid in four installments a year that is the 20th day of the 4th, 6th, 9th and 12th months. According to the conveners, a tax system should be stable, predictable and practicable in any economy. Both private and public sectors will be affected as businesses are struggling to meet their fixed costs
during the covid-19 pandemic. Introduction of minimum tax will lead to cash constraints that will limit business growth. The webinar opines that the existing tax policies should be employed as the Kenya Revenue Authority prepares for the appropriate timing to introduce minimum tax. The webinar raised a number of concerns including the likelihood of tax shift to consumers, 1% being a high rate when compared to Tanzania and Nigeria which have already implemented minimum tax at 0.5%, need for exclusion of startups in the tax to allow them room to break even and unpopularity of the tax as its introduction lacks public participation.

Review by Effie Odhiambo

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