May 20, 2024

Federation of Employers warns of mass layoff over Ruto’s tax measures

3 min read
Federation of Employers warns of mass layoff over Ruto's tax measures

Federation of Employers protests the government's unpredictable and hostile business environment over Ruto's tax policies

Federation of Employers protests the government’s unpredictable and hostile business environment over Ruto’s tax policies.

The Federation of Kenya Employers (FKE) has criticized the unfavorable and unpredictable business environment in Kenya amid the new tax measures the government is implementing to boost revenue.

While expressing support for President William Ruto’s administration’s efforts to increase revenue, the Federation issued a warning over the negative consequences of the actions.

“We are concerned about the adverse effects the initiatives have on the cost of doing business and on the citizens,” said FKE National President Dr Habil Olaka, adding that these revenue measures come on the backdrop of the Finance Act 2023, high electricity tariffs and a tight monetary policy.

He noted the effects as reduced take home for employees, shrinking profits for enterprises, and an unfriendly business environment.

The Federation wants the government to rethink the proposed income-raising initiatives included in the National Treasury’s draft medium-term revenue strategy for the fiscal years 2024/2025 to 2026/2027.

Dr. Olaka recommended that the government instead implement measures that will encourage higher production and consumption, thereby boosting business activity and producing chances for formal employment.

According to him, as income rises, the majority of workers will move into a tax bracket. The government will receive the much-needed funds to support its projects as a result.

It warned that a sharp increase in business operating costs will increase informal trade and shrink the formal wage bracket as enterprises, the majority of them being micro, small, and medium, will not be able to withstand the associated costs of the prevailing environment. 

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“We are seeing more tax measures being proposed in order to raise the necessary revenue for the government to meet its development agenda. I think there is a need for that to be balanced by the fact that the disposable income for the common citizen and even the cost of doing business for enterprises is affected negatively,” said Dr. Olaka.

The Federation came up with several proposals for the government on how to spur economic growth which include working on maintaining low tax rates for both individuals and corporates.

“The underpinning philosophy in tax management should not be taxing people and corporations into poverty. It should instead support many businesses and persons to increase their productivity and thereby enter into the tax bracket,” he said.

The FKE President said the challenge with the current administration is the desire to finance everything on their pledge. He insisted that sacrifices have to be made to attain the required balance.

He urged the government to make the business environment stable for employers to plan well.

“Employers are no longer able to plan their costs and inputs. Stability and predictability of the business environment is important for proper functioning of the business environment,” he noted.

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