Kenya pondering tax reforms to entice hesitant Western investors

Kenya is considering tax reforms, including possible tax breaks, to entice hesitant US and EU investors after Washington complained that corruption and a lack of transparency in tax policy inhibited investment in the East African country.

Nairobi is exploring various tax incentives to reluctant Western investors and it also threw out the red carpet for US investors this week, after these concerns were raised at an American Chamber of Commerce (AmCham) meeting in Nairobi, where President William Ruto was among the prominent speakers.

“My government is finalizing new tax policy guidelines that have gone through various stakeholder consultations, including inputs from AmCham. This policy that will enhance transparency in our tax regime will take effect by June and will be in place for at least three years,” Ruto said.

His government also intends to repeal a 1.5% fee on digital services, he said, which will be in exchange for the disputed global framework suggested by the Organization for Economic Cooperation and Development (OECD) on taxing multinational corporations that includes a minimum rate of 15%.

In a separate but related development, President Ruto has also urged the European Union and its member states to increase investment in African clean energy infrastructure to ensure Africa’s most important partner in the energy transition. “With the right level of investment, Africa can provide energy access for all by 2030 while reducing total emissions related to energy generation by approximately 80%,” Ruto said at the recent Berlin Energy Transition Dialogue. To that end, Kenya, on its part, is currently looking to partner with Italian investors in a bid to increase its national installed geothermal capacity to 10,000 MW by 2037, which is more than ten times the present capacity of about 949.13MW.

An agreement was inked in October 2022 between Unione Geotermica Italiana (UGI) and the Geothermal Association of Kenya (GAK), under which Italian investors will invest in selected geothermal projects. The International Renewable Energy Agency’s renewable energy statistics 2022 ranked Kenya’s 863MW geothermal capacity at position seven globally.