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{
"id": 1590415,
"url": "https://info.mzalendo.com/api/v0.1/hansard/entries/1590415/?format=api",
"text_counter": 345,
"type": "speech",
"speaker_name": "Molo, UDA",
"speaker_title": "Hon. Kuria Kimani",
"speaker": null,
"content": "The Committee further noted that retaining the 15 per cent corporate tax rate is grounded on the principle of strategic economic support that emphasises targeted incentives to sectors with high multiplier effects. These incentives are well aligned with modern industrial policy thinking, such as Ha-Joon Chang’s theory of the developmental state that advocates state-led support to build competitive industries and Michael Porter’s cluster-based approach that promotes growth of sectoral ecosystems through focused policy and fiscal incentives. Supporting local vehicle assembly and affordable housing not only inspires direct employment but also, stimulates ancillary industries, support chains, and service providers. It creates a broader economic impact. Therefore, maintaining this incentive ensures there is policy certainty. It strengthens investor confidence and sustains momentum in key sectors central to Kenya’s industrialisation and the inclusive economic development agenda. Clause 34 proposes to remove the word “taxable” from the relevant provisions, which was considered by the Committee in the context of strengthening tax administration. The Committee observed that this amendment is intended to mandate the issuance of tax invoices for both taxable and exempt supplies, thereby addressing existing challenges in the accurate determination of total turnover. It also aligns with the current requirement under the Electronic Tax Invoice Management System (eTIMS), which mandates invoicing for all transactions, except where specifically exempted under the Tax Procedures Act, Cap 469 B. The Committee supported the proposal, noting that it will enhance transparency, improve record-keeping, and contribute to more effective and consistent tax enforcement across all sectors of the economy. Clauses 36 and 37, which sought to reclassify certain supplies from zero-rated to exempt status were thoroughly, scrutinised by the Committee. The affected items included: Locally assembled and manufactured mobile phones; electric buses, motorcycles, and electric bicycles; lithium-ion and solar batteries; raw materials for the production of fertilisers and animal feeds; and Bioethanol Vapour (BEV) stoves, classified under HS Code 12.00. These are all critical areas in this country’s industrialisation, food security, and green energy transition agendas. The Committee observed that these items had only recently been granted zero-rated status under the Finance Act, 2023, in a deliberate policy shift aimed at incentivising local manufacturing, promoting the adoption of sustainable technologies, and lowering the cost of essential goods and services. Reverting them to exempt status would not only reverse these gains, but also disrupt market confidence, increase input costs, and undermine private sector growth. Particularly in emerging and job-rich sectors such as mobile device assembly and electric mobility. The Committee recommends to retain the zero-rated status of these key inputs. This is well-aligned with the Government’s broader policy objectives under the Bottom-Up Economic Transformation Agenda (BETA) and Vision 2030. These policy frameworks prioritise industrial growth, climate resilience, affordable energy solutions, job creation, and sustainable agriculture. For example, local mobile phone assembly has created thousands of jobs. While the electric mobility sector, including electric buses and bicycles, supports green transport initiatives and offers affordable transport alternatives. Lithium-ion battery production and the uptake of BEV stoves further contribute to environmental sustainability and reduced reliance on fossil fuels. For example, for lithium-ion batteries, Kenya is one of the largest manufacturers of lithium batteries. This allows us to even export to other countries including Tanzania. This has only been made possible through this zero-rating status. As much as we understand the strategy by The National Treasury to try to reduce tax expenditures which have been in excess of Ksh500 billion every year, remember our development budget is partly around Ksh650 billion, whereas our tax expenditure is around Ksh550 billion shillings. This means that our tax expenditure is almost as much as our The electronic version of the Official Hansard Report is for information purposesonly. A certified version of this Report can be obtained from the Hansard Editor."
}