National Assembly Speaker Justin Muturi said on Friday that private sector players have no option but to pay taxes to the government to enable it finance its operations.
Mr Muturi spoke in Mombasa during the second annual roundtable meeting with the Kenya Private Sector Alliance (Kepsa) in Mombasa, as the Kenya Revenue Authority (KRA) steps up measures to collect revenue to support the Sh3.02 trillion budget for the current financial year.
Faced with the difficult task of financing its key operations, the government has trained its sights on tax non-remittance.
The move has seen owners of organisations such as Keroche Breweries and Wow Beverages Limited huddled to court over tax evasion claims.
"Transfer pricing is a huge challenge that has inhibited economic growth by denying this country revenue through tax evasion by multinationals. It is high time that this issue was looked at as our revenue basket continues to leak," Mr Muturi said.
But Kipipiri MP Amos Kimunya urged the government to consider reducing the corporate tax burden, which is currently at 30 percent.
"Tax evasion could be high because we are stuck at a 30 percent corporate tax while the world is scaling it down," Mr Kimunya said.
The Speaker also took Kepsa to task for delaying the passage of tax gains to Kenyans.
"One wonders why the private sector is quick to implement any increase in taxes but drags its feet [when it comes to a decrease]," said the Speaker.
"For instance, when Energy and Petroleum Regulatory Authority announces an increase in the cost of petrol, it is quickly passed on to the consumer by Kepsa, and vice versa when the taxes are reduced.
"When you hear the cost of maize flour has been reduced through taxation measures, please prepare yourself to continue enjoying your plate of ugali at the same cost without any change in pricing. The private sector should ensure tax gains are passed as fast and enjoyed by the consumers."
Mr Muturi also decried the low penetration of the insurance industry in the country.
According to the Speaker, although the industry is one of the major job creators in Kenya, its penetration remains below three percent compared to emerging economies such as South Africa, Egypt and Nigeria.
A recent report by the Insurance Regulatory Authority shows agents and brokers are holding at least Sh40 billion in premiums owed to underwriters.
Recently, MPs amended the Insurance Act to bar brokers and agents from holding clients' money.
The Speaker also blamed Kepsa for the high level of unemployment in the country, saying it has skewed and slanted requirements of the Employment Act so as to continue relying on contracted employees.
Mr Muturi noted that some leading financial institutions and companies outsource or employ staff on contract through agents.
He said they pay lump sums to the service providers as the employees earn meagre salaries and do not get annual leave and other benefits guaranteed by the Employment Act.
"The right to fair labour practices is guaranteed by the Constitution so the private sector should abide by the requirements," he said.