“I think it’s an interesting move. It’s not necessarily an order but I think they’re saying that for those employers who are willing to pay for their workers to go on leave within Kenya, then they can be able to claim that as a deduction,” Fred Omondi, tax partner at Deloitte, told CNBC Africa.
“In a sense, it’s encouraging employers to meet the course of local holiday for their employees, but that’s a tough call to make for any employer because then it means they have to increase their costs, which I don’t think is what most companies want to do.”
Tax refunds have however been problematic in the past, with some companies not having received their refunds in years.
Omondi added that from a company point of view, payment for an employee’s vacation would however be an extra cost to the organisation.
By getting a tax deduction, one is able to claim back effectively 30 per cent of tax paid, but the move can still increase company costs to as high as 70 per cent of the expenses that are needed to pay for the employees’ holiday.
“Overall, it’s not really a tax-saving measure for the company, unless the company [already] has a scheme where in the employees contracts they’ve committed to pay some amount of the holiday [taken], and this usually is the case for maybe senior management or expatriates,” Omondi explained.
“Maybe that’s what informed this measure because we know that for expatriates who are recruited from abroad, most companies pay for them some amount to go back to their home country, and maybe that’s what the government was thinking about.”
The tax incentive could also be a response from government due to the slump in Kenya’s tourism sector, following a number of bomb attacks in the capital and on the coast in Mombasa, which ia a major tourist destination.
(READ MORE: Another bomb attack rocks Kenya’s Mombasa)
“The Kenyan tourist industry has a lot of potential. Looking at the number of tourists that we currently have, [which is] just around two million, that’s quite low for the Kenyan tourism [industry],” Omondi explained.
“One [plan] is obviously to market a lot to potential source markets, and we’ve had the government mentioning that they’re going to step up their marketing, although more with a focus to the Eastern world. We need to do a lot more marketing to all the source markets and encourage a lot more tourists to come in.”