Trade CS Lee Kinyanjui Says Govt Will Adopt New 3-Year Tax Policy for Industries and Businesses

Trade Cabinet Secretary Lee Kinyanjui has revealed that the government is considering adopting a new tax policy that protects investors for a 3-year period, a departure from the current policies that shapeshift every year.

‍Why This Matters: The CS noted a disturbing trend in which foreign investors were fearful of setting shop in Kenya, fearing the yearly changes in taxation policies. This, he argued, left Kenyan jobs hanging in the balance.

Speaking to Citizen TV on Monday, April 14, the CS detailed that his ministry was mulling implementing constant taxation measures that would run for three years without being altered.

He expressed that the current tax measures, usually adopted every year through the Finance Bill, have made many businesses fearful, with some companies even warning of job losses.

"Our taxation has not been very friendly to business. If you are coming to set up your industry for the next 10 years and you have borrowed money, your profitability depends on the taxation. In Kenya, taxes change every year, and so you do not know whether it is going to be 10% or 15%," he stated.

"One of the things that were are proposing is to have a 3-year period where most of the taxes that affect industry remain constant so that we increase the window of stability. In the past, people would hold on because cause means everything. We want to bring about stability."

The business community, including the Kenya Association of Manufacturers (KAM) has been pushing for predictable tax policies, warning that constant changes pose a threat to the sector.

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For instance, in 2024, the association advised that a predictable tax environment would enable the manufacturing industry to thrive and create millions of jobs.

Reports also indicated that the businesses were opting for countries that have predictable tax policies, such as Tanzania and Rwanda.

“We operate within the East African Community’s (EAC) common external tariff, meaning we are a customs union. The taxes are common across the region,” the association warned in 2024.

“In this competitive environment, each country tries to be more competitive than the other. We have been advocating for Kenya to remain competitive, and we don’t need anything from the government in terms of money; we just need an environment that is predictable first from a taxation point of view.”

Apart from tax measures on raw materials, the government has introduced other taxation measures such as the Housing Levy, which requires employers to also contribute similar contributions to their employees.

This has burdened many employers as their expenditure has gone up. As a result, companies have opted to pause recruitment or reduce their workforce.