President Ruto To Raise Tax Rate From 14% To 22%

In a hurry? Here’s a quick summary…

• President William Ruto defends government’s plan to increase taxes, aiming to raise Kenya’s tax rate from 14% to 16% by year-end and 20-22% by end of his term.
• Amidst plans for tax hikes, proposed changes to VAT system spark controversy, including taxation on previously exempted items like bread and alterations to financial service exemptions.

President William Ruto has defended the government’s initiative to impose additional taxes on Kenyans, asserting it as a vital strategy to bolster the nation’s revenue and curtail dependence on borrowing. 

Ruto aims to elevate Kenya’s average tax rate from the current 14 percent to 16 percent by year-end and envisions a further increase to between 20 and 22 percent by the conclusion of his term.

Acknowledging the foreseeable economic strain for citizens, Ruto underscores the long-term benefits he anticipates from the heightened taxes. 

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Speaking at an engagement with Harvard Business School’s Class of 2025 students, he emphasized the significance of fiscal responsibility, stating that the endeavor aims to ensure the country “lives within its means.”

The President emphasized the need for austerity measures, stating his commitment to steering clear of a financially distressed or debt-ridden nation. 

Contrary to popular belief, Ruto challenged the perception of Kenya having excessively high taxes compared to regional counterparts, citing empirical data to highlight the country’s comparatively lower tax burden.

Despite the rationale behind the tax adjustments, the proposal has stirred controversy, particularly concerning sweeping changes to the Value Added Tax (VAT) system. 

Among the proposed revisions are the inclusion of VAT on previously exempted items, such as bread, and the elimination of exemptions on various financial services.

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The Finance Bill 2024 outlines these changes, signaling potential impacts on the cost of living and business operations within the country. 

As discussions continue surrounding these fiscal policies, Ruto’s stance reflects a broader governmental effort to secure Kenya’s financial stability and foster economic growth.