high-costIf people living in poor countries are to work their way out of poverty, they need to have the opportunity to conduct business at a reasonable cost. Unfortunately, the cost of doing business in poor countries is often higher than in developed countries, making life harder for the poor. Deloitte tax partner Nikhil Hira explained some of the bureaucratic requirements in Kenya which increase the cost of doing business, in a recent article in The East African.

The publication of legislation is often delayed, so that business owners have very little notice of surprising new compliance requirements. For example, the publication of recent finance legislation was delayed, and it contained the surprising and expensive requirement that all Electronic Tax Register machines be made GPRS-enabled. The new requirement will probably help to reduce tax evasion, but in the meantime will impose considerable burdens on businesses.

According to Hira, a typical company is required to make more than 65 different payments to the Kenyan revenue authority each year. It takes almost 3 months to incorporate a company in Kenya, whereas in Rwanda it takes just two days. Hira also says that the government tends to introduce new types of taxes without thinking through their likely practicality. The new excise duty on financial institution charges and extractive industry withholding tax are examples of this.

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