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Treasury has unveiled a National Tax Policy in an attempt to create a more efficient, equitable, and predictable tax environment that supports economic growth and aligns with the government’s broader policy objectives.

The policy will provide a semblance of predictability and stability, promising a review every five years, in a move likely to enhance the ease of doing business by giving taxpayers a clearer understanding of the fiscal landscape over a medium-term horizon.

National Treasury and Planning Njuguna Ndung’u said the policy identifies and analyses the challenges of the current tax regime and sets out broad policy guidelines to address these challenges thereby forming a basis for tax reforms and review of existing tax legislation.

“This is critical in nurturing a conducive environment for both local and foreign investors,” he said.

To achieve the alignment of tax laws with other government policies and international best practices, a comprehensive review of these laws is proposed to be undertaken every five years. Ndung’u said the periodic review is designed to ensure that the tax laws remain relevant and responsive to current economic and social realities, treasury said.

In addition to these regular reviews, it is also proposed that stakeholders be actively engaged during the review of tax laws.

Engagement process

This engagement process will include an assessment of the impact of proposed changes on tax revenue and investment, ensuring that all relevant perspectives are considered and that the potential implications of changes are fully understood.

“For this purpose, government alongside this Policy developed a four-year Medium Term Revenue Strategy (MTRS) covering the period 2024/25 – 2026/27 that contains specific reform measures necessary to move towards a modern tax system which will significantly enhance revenue mobilization. The MTRS will improve the predictability of tax rates thus facilitating investment decisions,” Ndung’u said.

The implementation of this policy is a welcome development for Kenya’s business community, particularly the manufacturers who have been grappling with the challenges posed by an unpredictable tax environment.

According to Miriam Bomett, the deputy head of policy, research and advocacy at the Kenya Association of Manufacturers, the lack of predictability in Kenya’s tax regime has been a significant hurdle for the sector, causing disruptions in their operations and planning.

“This is what we have been saying. Too many changes each year are disruptive for companies. They are unable to plan themselves. This is a welcome move. Ensuring they implement the provisions is what we will all need to follow up on,” she said.

Speaking to Business Hub, Robert Maina, Associate Director at Ernest and Young, a multinational professional services network said while a comprehensive review provides an opportunity for major overhauls, it does not prevent a government from making smaller changes as needed.