This archive report was first published on 11 May 2020.
On May 11, 2020, the National Treasury proposed scrapping fiscal incentives for industrial park investors, a move that Parliament must handle with caution.
Kenya's manufacturing sector, which aims to generate jobs and boost economic growth, relies heavily on these incentives. Industrial parks, a relatively new concept in Kenya, were established to provide a conducive environment for small and large investments to thrive.
According to global best practice, countries reserve industrial parks for light manufacturing, encouraging innovation and new business frontiers. The government's latest tax moves may be informed by this approach.
The Finance Bill, 2020, seeks to impose import declaration fees on raw materials for industrial park investors building premises on more than 100 acres of land outside Nairobi and Mombasa. The Bill also aims to strike out the Cabinet Secretary's power to exempt companies from paying tax on raw materials used in construction.
Furthermore, the Bill seeks to remove the Treasury's power to exempt goods worth less than Sh200 million imported by park investors 'in furtherance of public interest or to promote investment.'
After extending tax reliefs to help firms and individuals navigate the COVID-19 pandemic, the Treasury is targeting tax collection. However, the government must tread carefully, as industrial parks are largely untried in Kenya, and the original tax incentives may have been the main reason why about 100 investors have lined up for space in the yet-to-be-built Naivasha site.
