Kenya institutes reforms to shore up tax revenue to 25 pct of GDP

  • World
  • Wednesday, 13 Sep 2023

NAIROBI, Sept. 12 (Xinhua) -- The Kenyan government on Tuesday announced a strategy of tax reforms that it seeks to use to shore up revenue in the financial years 2024/2025 and 2026/2027 and over the medium term.

Njuguna Ndung'u, the cabinet secretary for the National Treasury, said the government will use the reforms to raise revenue to up to 25 percent of the gross domestic product (GDP).

"Kenya's revenue yield is still below the desired East African Community (EAC) target of 25 percent of the GDP. This strategy outlines reforms of the tax system aimed at reversing the trajectory of the tax to GDP ratio and achieving the ratio of 25 percent by 2030," Ndung'u said of the document, dubbed Medium Term Revenue Strategy, released in Nairobi, the capital of Kenya.

He said the reforms that will be implemented during the strategy period are aimed at promoting investments across various sectors by removing market distortions. The official added that the tax reforms would enable Kenya to achieve the desired revenue growth that will reduce the fiscal deficit over the medium term to the EAC regional target of 3 percent of GDP.

Some of the suggested reforms include a review of taxes on petroleum products, repatriated profits, tobacco, and alcoholic beverages as well as the introduction of an excise tax on coal.

Chris Kiptoo, the principal secretary of the National Treasury, said the strategy has been prepared in an uncertain global economic context as the protracted effects of the COVID-19 pandemic and the Russia-Ukraine conflict continue to strain economies globally.

"These shocks have negative impacts on our macro-economic environment, thus creating a dilemma for tax policy between raising revenues and avoiding tax increases on adversely affected households and businesses," he said.

Kenya's revenue collection has nearly tripled to 16.3 billion U.S. dollars in the 2022/2023 period from 5.5 billion dollars in the 2012/2013 period.

The World Bank projects the country's economy will grow 5 percent in 2023, up from 4.8 percent in 2022.

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