[SIZE=7]Experts Explain Costly Consequences After Ruto Revokes Uhuru Policy Against US[/SIZE]
[ul]
[li]by MARK OBAR on Friday, 31 March 2023 [/li][/ul]
Ruto on Thursday, March 30, announced the lifting of a national policy that requires all foreign ICT entities set up in Kenya to have a 30 percent domestic equity.
Ruto stated that this position is untenable and had made it impossible for large corporations to invest in the country.
The Head of State explained that his government decided to lift the requirement for American technological companies in order to facilitate greater investment in the ICT sector.
In a deal that his government signed with the American Chamber of Commerce (AMCHAM), President Ruto stated that US tech companies were at liberty to take 100 percent ownership of their local subsidiaries or fully-fledged corporations.
"Additionally, our data protection law is aligned to support robust growth in data storage.
“Kenya has one of the most developed financial services sectors on the continent. We are ripe for the establishment of an International Financial Centre in Nairobi to attract global financial players,” President Ruto stated.
https://scontent-dfw5-2.xx.fbcdn.net/v/t39.30808-6/338982729_875677800165173_2732895054533963629_n.jpg?_nc_cat=107&ccb=1-7&_nc_sid=730e14&_nc_ohc=i3MZF4Ots20AX-Irz88&_nc_ht=scontent-dfw5-2.xx&oh=00_AfBVkmZlP-_sl-JqOdxVNsIIbSzriuNg45ydNxtVfJmaXw&oe=642E96B7
President William Ruto (Left), US President Joe Biden (Centre) and Retired President Uhuru Kenyatta (Right).
Kenya is currently working with Financial Actions Task Force (FATF) to ensure the country fully complies with the relevant international standards on money laundering and terrorist financing activities.
The raft of measures taken by President Ruto is meant to make Kenya an International Financial Centre.
An economist and a financial expert reacted to Ruto’s actions, giving divergent views on lifting the 30 per cent equity requirement and scrapping of 1.5 per cent levy on digital services.
According to analyst Teddy Kimani, President Ruto simply opened the Kenyan economy to the ownership of foreigners.
“Technically, President Ruto simply sold Kenya to foreigners. Tax breaks, tax reliefs, and removal of 30 per cent local shares requirements for non-African companies are outrageous,” Kimani claimed.
The analyst argued that Ruto simply invited American corporations to take over and own the Kenyan economy.
However, Economist Churchill Ogutu praised President Ruto’s decision noting that it will attract more investment into the country.
Ogutu explained that American companies will have easy ways into the country’s economic system without going through difficult local partnerships.
"Local equity ownership is the percentage ownership and control, exercised by individuals within an enterprise within a country.
“In this case, American companies will be at liberty to have 100 per cent ownership of their companies in the country,” Ogutu explained.
The economist also observed that the 30 per cent ownership had largely been abused by individuals who took advantage of foreign companies seeking investments in the country.
Ruto explained that Kenya had been opposed to the framework proposing a 15 per cent minimum tax rate on global firms.
“The growth of digital commerce has forced many countries to impose Digital Services Tax measures on income derived in their jurisdictions. Kenya has also done the same.
"Following discussions with players in this sector, we have committed to review this tax regime and align it with the two-pillar solution currently being developed by the Organisation for Economic Co-operation and Development (OECD) inclusive framework,” President Ruto told investors at the American Chamber of Commerce Regional Business Summit on Thursday, March 30, 2023.
Notably, Kenya’s rejection of the OECD minimum tax framework was a major hurdle in its negotiation with the United States of America for a free trade deal.