IMF advises Ruto on How To Introduce New Taxes Without Kenyans Resisting
The International Monetary Fund (IMF) has provided Sub-Saharan nations, including Kenya, with three strategies to combat opposition to fiscal reforms, such as the introduction of new levies.
In new recommendations contained in the report titled Resilient Strategies and Credible Anchors in Turbulent Waters, the IMF emphasized that the viability of the government’s newly implemented policies is contingent on their acceptance by the populace.
The Bretton Woods institution advised the governments of Sub-Saharan Africa to progressively implement new policies, such as taxation, in recognition of the resistance to such reforms.
The IMF’s recommendations are made in light of recent tax changes in Kenya, such as the introduction of the Housing Levy and a 16% VAT on petroleum, which have been met with opposition from the public due to their impact on the cost of living.
In addition, the government proposes additional salary deductions, including a 2.75 percent deduction for the National Health Insurance Fund (NHIF).
“Resistance to reform is very difficult to overcome in the fiscal area since the costs of the status quo are not always visible, while many new measures reduce, at least temporarily, the welfare of broad segments of society,” read the report in part.
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“The issue of public acceptability should be at the center of policy design for instance, by properly sequencing the reform process or conceiving compensatory measures.”
IMF also advised Ruto and his fellow Sub-Saharan presidents to educate the public about the new fiscal policies through communication campaigns.
The international financial institution argues that such campaigns allow the government to enlighten the populace about the long-term benefits and repercussions of initiating or failing to implement the reforms.
“More generally, public acceptance of reforms depends on the ability of governments to convince the population that they will use public funds in an efficient, fair, and transparent manner,” read the report in part.
IMF noted that its recommendations, such as strengthening tax administration management and human resources and instituting digital tax systems, have contributed to increased revenue collection in nations such as Rwanda.
Kenya has been recognized, among others, for adopting a comprehensive medium-term revenue strategy (MTRS) as part of these initiatives.
IMF advises Ruto on How To Introduce New Taxes Without Kenyans Resisting