Kenyan Tax Overhaul Could Raise KES 40 Billion

March 18, 2011 Taxation in Kenya

traditional birth attendantKenya has the potential to see staggering improvements in its tax revenues collections if the government were to re-examine and improve the tax system.

An overhaul of taxes in Kenya could see the government net over KES 40 billion (approx. USD 467.2 million) in extra revenues per year. The suggestion was made by the representative of the International Monetary Fund (IMF) in Kenya Ragnar Gudmundsson at a press conference held in Nairobi on March 17th.

In order to significantly raise overall tax collections, the government was advised to greatly broaden its tax base, simplify the Value Added Tax (VAT) system, and remove the wide array of currently available tax exemptions.

Ragnar Gudmundsson said that Kenya would see overall tax revenue improvements if its VAT system was overhauled, and an evaluation was carried out to examine the utility of currently available VAT exemptions. The primary goal of any changes should be to simplify the VAT structure, making it easier for taxpayers to understand. He said that the IMF is now working with the Kenyan government to reconstruct VAT, making it more efficient and fairer for low income earners. According to Ragnar Gudmundsson, the government needs to re-evaluate the overall costs and benefits of all the tax exemptions currently available in the personal income tax system. It was also said that Kenya has great potential to significantly raise revenues by adequately taxing the real estate sector.

Ragnar Gudmundsson said that the government also needs to introduce a taxpayer protection program. An independent think-tank also needs to be established, which will consider the country’s tax future and efficiency.

Photo by davida3