BBI proposal on start-ups taxation can spur growth

Tuesday, December 17th, 2019 00:00 |
Delegates follow proceedings of the BBI report launch at Bomas of Kenya. Photo/PD/SAMUEL KARIUKI

Conrad Onyango  

One of the many recommendations made by the Building Bridges Initiative team is tax exemptions for start-up businesses for up to seven years. 

If implemented, the proposal would be of great benefit to the youth seeking to start small businesses, and to the economy generally.

Kenya is a youthful economy and according to the Population Reference Bureau (PRB), Kenyans aged 15-24 years account for 20.3 per cent of the population. The rate is higher than the world’s average of 15.8 per cent and 19.2 per cent for Africa. 

What this means is that the country has a huge pool of manpower required to grow a robust economy. Unfortunately, we are yet to reap  dividends of the youth bulge.

Instead,  unemployment among the youth is at its highest, a situation  linked to rise in crime cases and other social evils.

A number of young people who start businesses are never successful due to unfavourable business environment, with heavy taxation topping the challenges  to entrepreneurship.

Data from Small Business Association shows that 50 per cent of start-up ventures fail to survive beyond their first five years and 33 per the first two years of operation. This is a large percentage that might just change economic fortunes.

The recommendations by the BBI team thus could offer some respite for start-ups and deter runaway crime. Indeed, it could be an antidote that could deliver double digit economic growth as envisioned in Vision 2030 economic blueprint.

The ultimate goal of the BBI proposal is to harness the country’s entrepreneurial spirit and local innovation culture to create more jobs to support the economy.

However, young people and policy-makers should now lead constructive debate and engagements on how the scheme will be better implemented to deliver desired results.

Forums should be held to discuss eligibility criteria for start-ups. The proposal as presented in the BBI report document gives a perception of a tax-free business for all youth.

But should it be a blanket benefit enjoyed by any start-up or should focus be placed on businesses and ideas that have been proven to be unique, innovative and scalable?

In this case, business ideas and start-ups would need to align their strategic plan with government agenda. For instance, if the scheme was to be implemented starting next year, businesses should align with the Big Four agenda.

How would government track the impact of beneficiary businesses? Would there be a need for a certificate of eligibility?  Such certificates would be critical in sieving through the targeted corporations with ability to create jobs and drive economic growth.

Another factor for debate should be a base turnover for these businesses or revenue projections for a business idea. This should help estimate, determine scalability and potential of an idea and business to generate job opportunities.

There also needs to be discussion on how to handle existing small businesses run by young people. How will they be included in the plan to ensure they also enjoy tax breaks to shore up their bottom line and save them from collapse?

There is still some time for youth to brainstorm, debate and shape narratives on this critical topic that holds a brighter future for their businesses ahead of a national conference slated for January 2020. —The writer is a data journalist based in Nairobi—[email protected]

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