Kenya is considering tax reforms to entice American investors

Chinedu Okafor April 1, 2023

President William Ruto at State House

Kenya is exploring tax breaks to entice reluctant Western investors. Nairobi threw out the red carpet for US investors this week, despite the US administration complaining that corruption and a lack of transparency in tax policy inhibited investment in Kenya.

These concerns were raised at the American Chamber of Commerce (AmCham) meeting in Nairobi, where President William Ruto was among the prominent speakers.

My government is finalizing new tax policy guidelines that have gone through various stakeholder consultations, including inputs from AmCham. This policy that will enhance transparency in our tax regime will take effect by June and will be in place for at least three years,” President Ruto said.

He also announced the government’s intention to repeal a 1.5 percent fee on digital services in exchange for the disputed global framework suggested by the Organization for Economic Cooperation and Development (OECD) on taxing multinational corporations, which includes a minimum rate of 15%.

While Kenya had previously rejected the framework, which proposed a 15% minimum tax rate on global corporations, President Ruto has changed his tone, and Kenya will now sign on to the OECD deal ahead of its implementation on January 1, 2024.

“The growth of digital commerce has forced many countries to impose Digital Services Tax measures on income derived in their jurisdictions. Kenya has also done the same. Following discussions with players in this sector, we have committed to review this tax regime and align it with the two-pillar solution currently being developed by the OECD inclusive framework,” he said.

At the event, US Ambassador Meg Whitman expressed worry about a fractured tax framework that discouraged US investment. She noted numerous tax regimes administered by several entities as barriers to conducting business.

“Kenya must have a consistent, transparent, and fairly administered national tax policy to attract and retain foreign direct investment and accelerate economic development,” she said.

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