Kenya National Chamber of Commerce and Industry (KNCCI) wants the government to lower the 1.5 per cent turnover tax to 0.5 per cent with no additional tax for small and medium enterprises (SMEs).

KNCCI President Eric Rutto said the move will help create wider pools for revenue collection that will not only allow business’ scalability but will also boost the country’s small businesses.

It will also serve as a catalyst for them to pay more to the government, he said while speaking during an event at State House on Friday.

Rutto also proposed a two-year tax holiday for start-ups alongside the fast-tracking of the Start-up Bill, saying it is for these reasons that countries such as India churn out the highest number of companies that have turnover of over $ 1 billion (Sh129 billion).

“We have studied the Indian economy for start-ups, and we want fast-tracking of the start-up bill. So, if you give us those tax holidays, two things will happen, one, growth, Secondly, you will formalise the SMEs,” he said.  

Growth of businesses

Tax burden factors, Rutto stated, stifle the growth of businesses in the country, noting that start-ups in particular, are unable to keep up with the rates amid low demand for goods and services. 

As a result, mixed trends in the business environment in the country continue to be seen where the rate of businesses exiting the Kenyan market fails to match with those that tap the space. 

Rutto said that a survey conducted by the Central Bank of Kenya (CBK) towards the end of last year indicated that business owners had noted that they are cautiously optimistic due largely to the regulatory environment.

They identified high taxation, high cost of doing business and reduced consumer demand as key factors that could limit the growth of firms this year thereby calling for collaborative measures with stakeholders and the adoption of improved structures to counter the challenges.  

Additionally, the Chamber wants the national government to reserve contracts worth over Sh5 billion for Kenyan-owned companies, although he acknowledged the reality that there are few companies that can handle such tenders.  It observed that Kenyan businesses have been unable to rise up to the challenge as there has been unfair awarding of the tenders.

“From our study, it is that for the last 22 years, the access of Kenyan companies, especially in terms of contractors and suppliers of goods, has not been fair and even currently we are seeing as low as even Sh500 million being accessed by locally registered but internationally owned companies,” he said. To help in achieving this ambitious proposal, Rutto is calling for the establishment of a construction guarantee that will go into a construction bank to address the persisting challenge.

“We propose that we have a construction guarantee and a construction bank letter so that these companies can be able to access and they can be able to complete the projects that you give them up to Sh5 billion,” he said during the event.

It was during this forum that he revealed that Burundi has major construction plans, and that they have signed a memorandum of understanding (MoU) to have Kenyan companies with the capacity to undertake the projects that are sponsored by some of the Bretton wood organisations.

“It will be a very big challenge for me to get indigenous companies. We have to build our Kenyan companies because Africa is looking at us,” he said.  Rutto called for the capitalisation of crucial infrastructures such as Kenya Industrial Estate, Kenya Development Corporation and Agricultural Finance Corporation for easier access to capitation by industries.

“We would like to invite you, as the Kenyan National Chambers of Commerce, to modernise these institutions so that we can be able to grow Kenyan companies that are able to compete globally,” he said.

On the same front, businesses have been struggling with getting access to affordable credits due to the defaults to banks occasioned by the high pending bills.

Players in the economy

This was evident in the past year, where businesses despite being the biggest players in the economy were unable to perform optimally due to the factor.

As a result, he now wants the government to allow the Sacco which they have formed as KNCCI to access Sh2 billion from the hustler fund for onward lending for an organised group consisting of over 60,000 companies and another Sh2 million as associated members through other business membership organisations in the grassroots.

“This will further help small businesses also access international markets while increasing the volume and value of exports in tandem,” Rutto added.