President William Ruto has committed to global leaders that he will operate within the constitution and the rule of law even as opposition leader Raila Odinga remains persistent on his public protests, which marked their third day today Thursday, March 30.
Dr Ruto on Thursday also said he had promised US President Joe Biden among other world leaders, that his government will respect the independence of public institutions.
“Just yesterday [Wednesday], we had a virtual meeting with US President Joe Biden and other world leaders at the Democracy Summit where I underscored our commitment to constitutionalism and the rule of law and respect for institutions,” President Ruto said during a government summit with the US Chamber of Commerce, in Nairobi.
President Ruto promised this even as his government made key tax concessions, backsliding from a hardline position the previous regime held with regard to taxation of multinationals operating within the digital space in the country that have been attempting to pay more taxes in their home countries but less in other countries where they operate.
While announcing several tax reforms including the launch of a new Tax Policy effective June, President Ruto said Kenya was shifting its position on the imposition of Digital Service Tax (DST) on multinationals, to stop taxing them directly and instead abiding by the guidelines by the Organisation for Economic Cooperation and Development (OECD).
Due to OECD guidelines, Kenya collects fewer taxes from the companies such as Amazon, Meta, Microsoft, Google, and others that operate in the country but are based in the US.
“Following discussions with players in this sector, we have made a commitment to review this tax regime and align it with the two-pillar solution currently being developed by the OECD, which is an inclusive framework,” the President said.
He said the OECD framework would guide the taxation of the multinationals, once negotiations were complete.
“We have made this policy shift because we consulted, we listened and we want to create a win-win partnership,” he said.
Dr Ruto also announced that after much wait for an operational tax policy that would assure businesses of stability and predictability of taxation regime, his government was finalizing one.
“This (tax) policy that will enhance transparency in our tax regime will take effect by June 2023 and it will be in place for a minimum of three years. We are doing this so that you can make your investment decisions knowing exactly how the tax regime will look for the next three years,” the President said.
The President also announced that starting in July, VAT on exported services would be eliminated, blaming the tax for being a challenge to businesses and an impediment to investors.
“This tax not only renders us uncompetitive as a country, but it also inhibits investors seeking to make Kenya their regional global services hub. Many companies are already operating out of Kenya and servicing regional markets,” the President said.
In new changes, the President also directed that going forward, businesses will be allowed to offset any unsettled tax refunds from the Kenya Revenue Authority (KRA) that go beyond six months from their tax liabilities.
“If, for whatever reason, a refund is not made by KRA within this period (six months), the taxpayer can offset their claim against future tax liability without further application to the KRA. If it’s okay for you to pay your tax in time, it must be okay for you to get your tax refund in time,” he said.
The government also says that it is exempting startup companies from employee benefits tax starting in July.
“It’s only fair that we give these startups a chance to be, by not imposing unnecessary restrictions, especially when initially they are not able to pay as much for their employees and instead they want to allocate some shares,” said Dr Ruto.
The government has also finalized a deal with US pharmaceutical firm, Moderna, to build a $500 million mRNA vaccine facility in Nairobi, following plans that started last year.
“This will be the only such facility on the African continent and, for Moderna, their first factory outside the US,” Dr Ruto said, noting that the investment would catalyze the medical and pharmaceutical industry in Africa.
The President also indicated that during his tour in Germany, the government signed a deal that will see the investment of Sh350 million into the ongoing Bus Rapid Transit (BRT), which has been under implementation for several years now.
“I just came back this morning from signing an agreement that will give us about Sh350 million to do our BRT that will be working on e-mobility,” he said.
