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Tax burden: Ukur Yatani prepares ground for William Ruto to fund projects

 

Treasury CS Ukur Yatani at the Parliament buildings, Nairobi to present his final 2022/23 budget on April 7, 2022. [Elvis Ogina, Standard]

The National Treasury has kicked off a long-term road map to fund new investments at a time the incoming government is scrambling for ways to keep a lid on the deficit while reducing the tax burden on Kenyans.

National Treasury Cabinet Secretary Ukur Yatani said the strategy will be developed through a “consultative process” and will focus on enhancing tax compliance, broadening the tax base and improving tax administration.

“The medium-term revenue strategy is expected to address the declining revenue trends and entrench the predictability of tax rates,” said Mr Yatani in a circular to State officials seeking input on preferred revenue raising measures.

President-elect William Ruto, who will be sworn into government on Tuesday, says the taxation system under his leadership will ensure “fairness” and “equity” adding that all potential taxpayers will be brought on board.

“There will be no tall men or big girls,” said Dr Ruto recently after winning the polls, signalling his plan to overhaul the system and broaden the tax base.

“The rule of law is going to equalise every Kenyan so that each one of us can pay all their taxes.”

Economic analysts say the medium-term tax plan announced by Mr Yatani offers the incoming administration an opportunity to reset the country’s tax regime over the long term to reflect the priorities of the Ruto administration and promises made to Kenyans ahead of the next cycle of budget-making.

The review comes at a time when there is significant public pressure for the new government to ease some of the taxes and analysts say there is a need for a balancing act.

“The new government will definitely have a big say in what goes into it,” said John Kinuthia, a senior programmes officer at the International Budget Partnership Kenya (IBP-Kenya).

“The proposals in their manifesto on growing government revenue will find space here.”

Raise more revenue

The Yatani document focuses on how the government can raise more revenue to get to 25 per cent of gross domestic product (GDP) by 2030.
Kenya is now at 15.2 per cent of GDP, data shows.

“The revenue to GDP ratio has been declining over time and hopefully this strategy development process will highlight why that has been the case,” Mr Kinuthia said.

“The economy has become more productive but the government has not been able to raise more taxes from it, and that is curious.”

The President-elect has hinted he will go big on social spending as he moves to address the runaway cost of living, but also cut public borrowing.

He will, however, have to steer an economy battered by the Covid-19 pandemic, rising food and fuel prices spurred by the war in Ukraine, the worst drought in four decades and soaring public debt.

Leonard Wanyama, the regional coordinator of the East African Tax and Governance Network said given the tax situation is going to be “front and centre of policy making” the proposed strategy by the Treasury will be vital for the new administration.

Kenya Revenue Authority exceeded its collection target by Sh148.9 billion in the fiscal year ended June.

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