KENYA: Treasury Cabinet Secretary Njuguna Ndungu has disclosed that the Ruto administration plans to cut corporate taxes to 25 percent from the current 30 percent from FY24/25 and beyond.
Additionally, the authorities plan on reintroducing a minimum tax; reviewing the value added tax rate and its threshold; introducing an excise duty on coal; introducing a carbon tax; introducing a vehicle circulation tax; and finally introducing VAT on education and insurance. (Bloomberg).
Since last year, the notion of higher taxes has been heavily opposed given the state of households and businesses as they have faced elevated price pressures. Recall that the legality of passing the Finance Bill 2023 culminated on 8 September, when the Supreme Court opted to uphold the decision made by the court of appeal, effectively allowing the Finance Bill to stand. This is despite the continuous backlash the government has received on the raft of tax changes.
Recall that in FY22/23, Kenya missed its revenue targets, collecting KES2,360.5 billion (16.3 percent of GDP) against a target of KES2,478.6 billion. The target was missed given shortfalls in tax collections. In FY23/24, the government is hoping to raise KES2,919.8bn (18.5 percent of GDP), with the Finance Bill’s raft of new taxes, expected to support this endeavour. We have highlighted before that it is unlikely that government will meet its target this year, but the Finance Bill is a step in the right direction if Kenya wants to raise its total revenue as a percentage of GDP to 25 percent by the end of 2030.