Kenya Ranked Top in Tax Reform Report by OECD

  • President Uhuru Kenyatta addresses a virtual summit of THE Organization of the African, Caribbean and Pacific States OACPS on Wednesday, June 3, 2020
    President Uhuru Kenyatta addresses a virtual summit of THE Organization of the African, Caribbean and Pacific States OACPS on Wednesday, June 3, 2020
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  • Kenya was on Thursday, July 9, ranked among leading countries fostering tax reforms for economic growth in a global report on corporate taxation.

    The report commissioned by the Organisation for Economic Co-operation and Development (OECD) singled out Kenya as one of the global jurisdictions with a generous accelerated depreciation corporate tax policy alongside Italy, Papua New Guinea and Cote D’Ivoire.

    The 2019 report dubbed Corporate Tax Statistics (second edition) provided fresh insights into the global tax and economic activities of nearly 4,000 multinational enterprises (MNE) groups headquartered in 26 jurisdictions and operating across more than 100 jurisdictions worldwide.

    Of the 74 jurisdictions covered in the 2019 analysis, 57 provided accelerated depreciation, meaning that investments in the areas were subject to Effective Average Tax Rate (EATRs) below their statutory tax rates.

    In 2019, the largest reductions were observed in Italy (4.9 percentage points), Kenya (3.8 percentage points), Papua New Guinea (3.7 percentage points) and Cote d’Ivoire (3.4 percentage points).
    In 2019, the largest reductions were observed in Italy (4.9 percentage points), Kenya (3.8 percentage points), Papua New Guinea (3.7 percentage points) and Cote d’Ivoire (3.4 percentage points).
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     “Among those jurisdictions, the average reduction of the statutory tax rate was 1.7 percentage points; in 2019, the largest reductions were observed in Italy (4.9 percentage points), Kenya (3.8 percentage points), Papua New Guinea (3.7 percentage points) and Cote d’Ivoire (3.4 percentage points),” the report stated.

    Reacting to the report, Kenya Revenue Authority (KRA) Commissioner-General Githii Mburu acknowledged that Kenya had managed to make headway on the corporate tax front.

    He added that further engagements and reform initiatives were underway as part of the national effort to tackle Base Erosion and Profit Sharing (BEPS).

     “The Corporate Tax Statistics report provides a welcome dashboard on the global status and will allow us to enhance our ongoing benchmarking against global standards such as the BEPS Action plan.

    “The Government through the National Treasury among other agencies have been providing much-needed support to ensure adherence to multilateral treaties and conventions required on this front," he noted.

    Kenya’s tax policy allowing for the expensing of intangible assets is also noted as an innovative development.

    In many jurisdictions, investments in intangibles are subject to very different effective tax rates (ETRs) due to significant variation in tax treatment across jurisdictions.

    Treasury CS Ukur Yattani (Left) with KRA Commissioner-General Githii Mburu (right) at Treasury Buildings in May 2020.
    Treasury CS Ukur Yattani (Left) with KRA Commissioner-General Githii Mburu (right) at Treasury Buildings in May 2020.
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