Why proposed legislative amendments could be a game changer

Dr Chris Kiptoo CBS, Chief Secretary to the National Treasury

ARTICLE by Dr Chris Kiptoo CBS, Chief Secretary to the National Treasury

The proposed legislative reforms – the Business Laws Amendment Bill, the Taxation Laws (Amendment) Bill, the Tax Procedures (Amendment) Bill and the Public Finance (Amendment) Bills – mark a bold and progressive step in changing the economic management of the country.

These amendments are designed to remove historical barriers to private investment, streamline tax policy and enhance fiscal responsibility.

The Government has high hopes that these legislative changes will create a dynamic environment in which sustainable growth, innovation and sustainability can flourish.

The timing of these proposals is critical as the country faces an increasingly uncertain global economy and stiff competition within and outside the region to attract investment.

Kenya must position itself as a leading destination for business and innovation, and these reforms can provide that competitive advantage.

Through the Business Laws Amendment Bill 2024, the government aims to reduce bureaucratic complexities that hamper business operations. By streamlining business processes and removing excessive regulatory barriers, the legislation is designed to make it easier to do business in Kenya.

Investors – both local and international – will benefit from faster start-up processes, simpler compliance requirements and, ultimately, more opportunities for growth.

In tandem with these business-friendly changes, amendments to tax and public finance laws are intended to improve Kenya’s fiscal structure.

Simplifying tax laws and improving public financial management have been long-standing recommendations from economists and business leaders.

With a more transparent and manageable tax system, Kenya could create a tax-friendly environment that encourages tax compliance and supports critical government services.

Additionally, by increasing the transparency of public finances, the government can reassure citizens that their taxes are effectively funding vital services.

Another aspect worth considering is accountability. Amendments to public finance laws aim to improve oversight and transparency in the management of public funds, but effective implementation will be critical.

Kenyans have seen previous reform efforts stalled by weak enforcement, resulting in persistent financial inefficiencies.

Civil society leaders argue that unless strong accountability mechanisms are put in place and strictly enforced, public trust will be difficult to restore.

Improving public financial management is not just about creating new laws; The point is that these laws lead to concrete, positive changes in the way funds are managed and used for the benefit of society.

Moreover, Kenya’s proposed amendments should be assessed in the broader regional context. As neighboring East African countries undertake similar reforms to attract foreign investment, Kenya faces a competitive situation.

Successful implementation of these changes could improve Kenya’s ranking on the Ease of Doing Business Index, positioning it as a regional leader and providing a significant advantage in the race for investment.

However, if the promises of these reforms remain unfulfilled, Kenya may struggle to maintain its attractiveness as other countries present more reliable investment destinations. Effective execution is therefore paramount to Kenya’s long-term competitiveness.

The potential impact of these amendments on the Kenyan economy goes beyond simply creating an enabling environment for business; they also lay the foundation for sustainable economic sustainability.

Despite global challenges, Kenya’s economy has shown remarkable stability, with inflation rates gradually declining and the Kenyan shilling remaining stable against major currencies.

These figures reflect effective monetary policy, which is creating a stable environment conducive to projected GDP growth of 5.4% this year, which is expected to rise to 5.6% by 2025. However, maintaining this trajectory will require more than just stability; this will require a strategic review of existing tax policies and administrative systems.

A broader tax base and fair tax treatment will allow the government to mobilize revenue without stifling business activity.

Kenya’s Medium Term Revenue Strategy (MTRS) provides a structured path to balancing revenue generation with economic growth.

MTRS prioritizes broadening the tax base by targeting highly taxed industries, thereby reducing pressure on existing businesses.

Additionally, re-evaluating tax incentives to ensure they are consistent with national goals and increasing the transparency of these incentives are critical to maximizing their impact.

A well-managed tax incentive system can ensure that resources are effectively channeled to essential services such as health, education and infrastructure. Debt management also remains a pressing issue.

While Kenya’s infrastructure investments have boosted economic growth, many of these projects have been financed through borrowing, highlighting the importance of sustainable debt management. National Treasury has committed to improving debt servicing strategies, increasing citizen participation in fiscal policy, and ensuring transparency and accountability in financial decisions.

These efforts are vital to maintaining debt sustainability and ensuring the judicious use of public resources. Kenyan citizens are increasingly vocal about the need for transparency and accountability in government spending.

National Treasury’s commitment to improving public financial management (PFM) reflects this requirement. By introducing a comprehensive e-government procurement system, the government aims to improve transparency and accountability in public procurement.

Additional reforms in asset and inventory management will also help ensure optimal use of government resources. Through greater transparency of public assets, the government can maximize value for money and promote a procurement environment based on fairness and justice.

The Kenya Revenue Authority (KRA) has also developed its ninth corporate plan, which is in line with Kenya’s Vision 2030 goals of transforming the country into a newly industrialized, middle-income country.

Revenue mobilization is essential to achieving these goals and National Treasury is committed to supporting KRA in achieving the goals set out in the plan.

Effective revenue mobilization is vital to achieving Kenya’s fiscal ambitions and securing resources for national development. The dedication of Kenyan citizens and businesses who consistently meet their tax obligations cannot be overlooked.

These individuals and organizations exemplify a shared commitment to national progress. Their efforts strengthen Kenya’s economic foundation and their contributions should be recognized and celebrated as important to the economic sustainability of the country.

Ultimately, Kenya’s path to a better business climate and stronger economic governance is a collaborative effort that requires sustained commitment from all stakeholders – government, business and citizens.

The proposed legislative amendments have the potential to transform Kenya’s economic landscape, but realizing this potential will require rigorous implementation and unwavering accountability.

Kenya is at an inflection point, with an opportunity to redefine its economic trajectory and create a sustainable and prosperous future for all.

Dr Chris Kiptoo CBS, Chief Secretary to the National Treasury