The Federation of Kenya Employers (FKE) is calling for drastic tax cuts in this year's budget to make domestic production cheap and bolster the poverty eradication campaign.

The federation's proposals to the budget office, signed by its chief executive Tom Owuor, seek to have value added tax reduced to 15 per cent from 18 and eventually to 10 per cent with that on electricity lowered to five per cent. 

It also wants the top rate of personal and corporate income tax reduced to 25 from 30 per cent. 

A special reduced corporate tax rate for export earnings should also be put in place as an incentive to exporters. Farmers would also benefit from zero rating of import duty on farm machinery, currently 30 per cent, if the federation's proposals are effected. 

The federation further argues that duty on sugar machinery spares be dropped to 3 per cent from 15 in order to make local millers more competitive in the region. It also calls for the presumptive tax on farm income to be waived. 

Home owners would also benefit from increased mortgage interest relief, which that the federation wants raised to Ksh200,000 ($2,500) from Ksh56,000 ($715) to reflect increased interest rates. Terminal benefits for retrenchees below Ksh300,000 ($3,850) should also be tax exempt, the employers' body says.

In order to level the liberalised broadcasting space, the federation wants tariffs on television permits removed. "It is not appropriate to pay the Kenya Broadcasting Corporation fees for television and radio permits," Mr Owuor argues.

Mr Owuor also says duty on newsprint for internal use by newspapers should be waived so as to make newspapers, a critical medium for civic education, more affordable. 

Although satisfied with the government's monetary policy that aims at keeping inflation under 5 per cent, the federation says wage awards should be determined by industrial performance. "One way of maintaining a low inflation rate is by having wage awards strictly aligned to productivity of enterprises," FKE proposes.

It calls for the country's points of call to be manned effectively to check against dumping of transit and counterfeit goods on the local market, a menace that currently costs the economy about Ksh30 billion ($385 million) a year. 

The federation is also asking the government to consider waiving interest and penalties for taxpayers not audited by VAT and Income Tax inspectors within 12 months of the submission of annual returns. 

It also wants pre-shipment agencies held accountable for costs associated with landing of substandard goods. 

Concerned with the scourge of corruption, the lobby wants the government to move towards zero tolerance of graft by promoting an anti-sleaze culture. The lobby also asks the government to restore relations with donors and boost investor confidence.

The proposals also call for an equitable distribution of economic opportunities.