Report for Tax Justice Network-Africa and ActionAid-International (June 2012)
The government of Kenya is providing a wide range of tax incentives to businesses to attract greater levels of Foreign Direct Investment (FDI) into the country. Yet this study shows that such tax incentives are leading to very large revenue losses and are anyway not needed to attract FDI. Recent government estimates are that Kenya is losing over KShs 100 billion (US$ 1.1 billion) a year from tax incentives and exemptions. Of these, trade-related tax incentives were at least KShs 12 billion (US$ 133 million) in 2007/08 and may have been as high as US$ 566.9 million. Thus the country is being deprived of badly-needed resources to reduce poverty and improve the general welfare of the population. In 2010/11, the government spent more than twice the amount on providing tax incentives (using the figure of KShs 100 billion) than on the country’s health budget – a serious situation when 46% of Kenya’s 40 million people live in poverty (less than US$ 1.25 a day).