The Central Bank of Kenya (CBK) recently conducted its May 2023 CEOs Survey to gauge the views and perceptions of Chief Executive Officers (CEOs) of private firms in Kenya. The survey highlighted improved business optimism, driven by factors such as favorable weather conditions, easing inflation, and firm-specific growth opportunities. However, CEOs expressed concerns about proposals to increase taxation in the Finance Bill 2023, the continued weakening of the Kenya shilling, reduced market liquidity, and rising fuel prices.
The CEOs surveyed showed increased optimism regarding their company’s and sector’s growth prospects. This positive sentiment was attributed to improved weather conditions, which are expected to support agricultural production.
The survey revealed a slight improvement in business activity during the second quarter of 2023 compared to the first quarter. Financial and ICT services experienced increased activity, supported by the Easter period and school holidays. However, factors such as high interest rates, the weakening Kenya shilling, anti-government protests, and reduced liquidity in the market constrained overall business activity.
CEOs also expressed improved optimism for global economic growth, albeit with some uncertainty. The improving economic outlook was tempered by concerns over the ongoing conflict in Ukraine and potential interest rate hikes in advanced economies. While the CEOs acknowledged the positive trends in the global economy, they remained cautious about the potential risks associated with geopolitical tensions and monetary policy changes.
Proposed Taxation in Finance Bill 2023:
However, amid the overall positive outlook, CEOs expressed concerns about the proposed taxation amendments outlined in the Finance Bill 2023. The Bill, presented to Parliament by the Kenya Treasury Cabinet Secretary, aims to amend various tax laws, including the Income Tax Act, VAT Act, Excise Duty Act, Tax Procedures Act, and Miscellaneous Fees and Levies Act.
CEOs voiced their apprehensions regarding the potential impact of increased taxation on their businesses. They worry that higher tax burdens may hinder their growth prospects and financial sustainability. While the details of the proposed tax amendments are yet to be finalized, the CEOs urged policymakers to consider the potential consequences for businesses and the overall economy before implementing any changes.