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Ruto To Raise Tax Rate From 14% To 22%: “You Will Complain But Finally Appreciate”

Ruto To Raise Tax Rate From 14% To 22%: “You Will Complain But Finally Appreciate”

President William Ruto has stood by the government’s initiative to impose additional taxes on Kenyans, asserting it as part of a broader strategy to boost the country’s revenue and reduce dependence on borrowing.

The President aims to elevate the country’s average tax rate from 14 percent to 16 percent by year-end, with a longer-term goal of reaching between 20 and 22 percent by the conclusion of his tenure. Despite recognizing the economic burden this will impose on Kenyans, Ruto believes the eventual benefits will justify the heightened tax obligations.

During a discussion with Harvard Business School’s Class of 2025 on Africa’s trade and investment potential at State House, Nairobi, President Ruto conveyed his determination to advance Kenya’s tax base. He emphasized that the move was also aimed at ensuring fiscal responsibility, asserting the need for the country to live within its means.

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Ruto dismissed the notion that Kenya’s tax rates are exorbitant compared to its regional counterparts, citing empirical data that places Kenya’s tax-to-revenue ratio at 14 percent, while peers in the continent average between 22 and 25 percent. He emphasized the necessity for Kenya to enhance its revenue generation to align with that of serious states, although acknowledging that the comparison should not be made with OECD countries.

The President’s statements come amidst proposed changes to Kenya’s Value Added Tax (VAT) system, which would impact the cost of various commodities for millions of Kenyans. Notably, these changes include levying VAT on bread and introducing a mandatory tax for all motor vehicle owners as part of funding the 2024-2025 budget.

The proposed Finance Bill 2024 entails significant modifications to VAT exemptions, encompassing financial services such as credit and debit card issuance, telegraphic money transfers, and cheque handling, processing, clearing, and settlement, including special clearance or cancellation of cheques.

Ruto To Raise Tax Rate From 14% To 22%: “You Will Complain But Finally Appreciate”

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