The Federation of Kenya Employers has warned of more job losses as a result of the implementation of the Finance Act, 2023.
In a statement Friday evening, the federation said the Finance Act, 2023 has made the cost of doing business unsustainable by negatively impacting cash flows for many enterprises thereby impacting payrolls.
The federation said preliminary survey shows that 70,000 Kenyans have lost jobs over the last one year and more are at risk of losing their employment as employers consider more job cuts.
“It (the survey) shows that between October 2022 and November 2023, we have lost 3 per cent (70,000) of the jobs in the formal private sector and 40 per cent of employers have reported that they are planning to reduce the number of employees to meet the increasing costs of operating in Kenya. We will be launching the full survey report on Jobs Trends in the month of December 2023,” FKE said in the statement.
The statement came after a management board meeting called to evaluate the state of doing business in the country.
The board noted that he weakening shilling has worsened the situation and adversely affected businesses that rely on imports.
The Federation observed that the Kenya shilling lost 21 per cent of its value over the past one year for the period ending November 22, 2023.
“The exchange rate of Kenya shilling against the USD has hit a high of 152.45compared to 121.05 at the same time in 2022.”
In the statement signed by FKE President Habil Olaka and CEO Jacqueline Mugo, the Federation said besides the weak shilling, companies are still reeling from the aftereffects of the Covid-19 pandemic and many are yet to regain the financial muscle.
“The employment state is still very fragile. We are not yet back on track since COVID-19. Every day we receive notifications from employers on their intent to declare redundancy,” they said.
The Federation noted that the sorry state of affairs are being exacerbated by the increase in business costs largely driven by tax measures, global geopolitical developments and climate change.
The employers’ body said whereas the country may not do much about the geopolitical developments like the Russia-Ukraine conflict, it’s within its power to review ax measures that high adverse impact on individuals and businesses.
The Federation said the key taxes that need to be reviewed are VAT on petrol, PAYE and Corporate tax whose impact has greatly reduced the purchasing power of citizens and the cashflow in enterprises.
“We propose that the VAT on petrol revert to 8 per cent as it was before the enactment of the Finance Act 2023. The increase in VAT on petrol has a regressive effect on the economy,” FKE said.
“We also appeal to policymakers to consider reducing the PAYE to a maximum of 25 per cent. This is because food inflation remains the highest contributor to the cost of living.”
The enactment of the Finance Act, 2023 introduced a raft of tax measures in what the Kenya Kwanza government said was to expand the tax base to increase revenue base and save the country from over reliance on loans.
Other than the doubling of VAT on fuel from 8 to 16 per cent, the new Act required Kenyans to make a monthly contribution of 1.5 per cent of their gross pay towards the affordable housing programme.
To reverse the negative effects of the new taxes on the cost of doing business, FKE proposed that the government reviews the taxation model and caps the amount at Sh5,000 as was initially proposed.
The Federation also called for a review of the corporate tax to the previous 25 per cent from 30 per cent to help attract investors and help corporates plough the money back into their businesses and create more employment.
“The additional investment will result into more tax revenue. In addition, we seek the removal of the minimum turnover tax. This tax is going to exacerbate informality and destroy microbusinesses that employ 84 per cent of wage employees in Kenya.
“Businesses are closing down, and we are seeing employees increasingly becoming working poor.”
Source: The star