President William Ruto has unveiled ambitious plans to elevate Kenya’s tax revenue to a whopping 22 per cent from the current 14 per cent.
Addressing the Harvard Business School’s Class of 2025 at State House, Nairobi on Wednesday, May 15, Ruto stressed the importance of bolstering the nation’s financial health and reducing reliance on external borrowing.
Ruto outlined a phased approach to achieve the desired increase, aiming for a rise to 16 per cent in the current year, with a long-term target of reaching between 20 and 22 per cent.
“My drive is to push Kenya, possibly this year we will be at 16 per cent from 14 per cent. I want in my term, God willing, to leave it at between 20 and 22 per cent. It’s going to be difficult, I have a lot of explaining to do, people will complain but I know finally they will appreciate that the money we go to borrow from the World Bank is savings from other countries,” Ruto said.
The Head of State said that upon assuming office, he initiated measures to instil fiscal discipline for the country to live within its means
“When I came into office, I told everybody to tighten up your belts… I’m not going to preside over a bankrupt country… We have to cut our spending. And there is no free lunch,” Ruto declared.
Ruto pointed out that Kenya’s tax revenue as a percentage of total earnings trails behind that of peer nations on the continent.
“Our peers in the continent are on an average of between 22 and 25 per cent, which means our taxes are way below those of our peers,” he explained.
Ruto remained confident that the move is essential for Kenya’s economic resilience.
“I know finally they will appreciate that the money we go to borrow from the World Bank is savings from other countries,” Ruto affirmed noting the importance of reducing dependence on external financing.
He dismissed comparisons with the Organisation for Economic Co-operation and Development (OECD) countries, noting that Kenya’s tax rates remain comparatively low and must be augmented to ensure fiscal sustainability.
“And I’m not comparing ourselves with OECD countries. Countries like France are at 45 per cent, others are higher. So I persuaded and made a case to the people of Kenya that we must begin to enhance our revenue because if we are a serious state we must be able to enhance our taxes,” Ruto said.
“My drive is to push Kenyans to pay 22% of taxes from the current 14% by the end of my term,” President Ruto vows to increase taxes pic.twitter.com/R41XBaT7vN
— Citizen TV Kenya (@citizentvkenya) May 15, 2024
Finance Bill 2024
This comes hot on the heels of the National Assembly Committee on Finance has called upon Kenyan citizens to share their perspectives on a newly introduced bill.
This bill, unveiled on May 9, 2024, was formally presented to parliament on May 13, 2024, by Treasury CS Njuguna Ndung’u.
The proposed legislation encompasses alterations to various tax laws, including the Income Tax Act, VAT regulations, Exercise Duty policies, and amendments to the Affordable Housing Act.
One notable provision within the Finance Bill 2024 is the proposal to increase excise duty rates on fees associated with money transfer services offered by banks, money transfer agencies, and other financial entities.
Additionally, the bill suggests implementing a 16 per cent VAT on previously zero-rated items like ordinary bread, which could lead to increased consumer costs.
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