Kenyan Budget Cause Tax Debate

June 8, 2011 Taxation in Kenya

Finance Minister of Kenya Uhuru KenyattaIn the lead up to the government of Kenya revealing its next annual budget plan, debates are rising across the country regarding the issue of taxation.

The Finance Minister of Kenya Uhuru Kenyatta is scheduled to release the national budget plan this afternoon, June 8th. The Treasury of Kenya has indicate that the budget will outline an approximate KES 1.2 billion (USD 13.68 million) in government spending. It has also been revealed that in order to support the government’s expenditures, new foreign borrowing will be taken on. The proposed borrowing plan has sparked wide ranging debate in Kenya on what improvements can be made to the tax system to boost government revenues and decrease reliance on foreign aid.

On June 7th the governor of the Central Bank of Kenya Njuguna Ndung’u, suggested that the government should investigate the possibility of increasing the tax rate on luxury goods. He said that a small rise in the tax would not have any strong negative effects on the economy, but would serve well to support national growth and development projects.

Calls have also risen to instate a capital gains tax into the Kenya’s national tax system. According to the opinions of several local experts expressed in the national media, a capital gains tax is a perfect means to increase government revenues from high performing sectors of the economy, while imposing no extra tax burden on the country’s lowest income earning taxpayers.

The speculative debates have risen steadily in the last two months, after the Finance Minister did not present budgetary estimates for government and public comment, as required by law. The Minister was mandated to table a draft budget outline at least two month before its official release. House Speaker of the Kenyan Parliament Kenneth Marende has said that Uhuru Kenyatta will be required to officially explain his actions in the near future.

Photo by International Monetary Fund