This archive report was first published on 9 May 2020.
Kenya's economy is facing a tough time due to the COVID-19 pandemic, with many Kenyans struggling to make ends meet. Amidst this gloom, the government is proposing new taxes to boost its revenues, which could further increase the burden on Kenyans.
The proposed taxes include a 15% increase in residential income tax, which will affect landlords and tenants alike. According to audit firm KPMG, the increase in tax rates will put pressure on landlords, who will be forced to pass on the tax burden to tenants through increased rents.
Additionally, the Treasury has proposed a VAT charge on liquefied petroleum gas (LPG) of 14%. Previously, LPG was exempted from taxation, and the new charge will substantially raise the cost of feeding millions of Kenyans.
The proposed VAT also goes counter to the government's campaign for more Kenyans to adopt LPG for cooking instead of wood fuel. Furthermore, the 14% VAT is higher than the eight percent charged on other petroleum products.
The government is looking to increase its tax revenues to repay the huge public debt while also financing President Uhuru Kenyatta's legacy projects, the Big Four, consisting of affordable housing, manufacturing, food security, and universal health coverage.
The Budget Policy Statement published by the Treasury in February shows that the government plans to spend Sh2.7 trillion this financial year, against revenue projections of Sh2.1 trillion, which leaves it with a deficit of Sh571.2 billion.
