The government has proposed a raft of tax measures as part of its Medium-Term Revenue Strategy aimed at boosting domestic revenue which has been declining over time.
The tax reforms which will cover the 2024-25 and 2026-27 financial periods are aimed at expanding the revenue base to raise funds to finance government programmes for the remaining period of Vision 2030.
"The specific objects are to raise tax revenue to GDP ratio from 13.5 per cent in Financial year 2022-23 to 20 percent by end of the Financial Year 2026-27," Treasury says in draft proposals.
It adds that once implemented, the tax measures will improve tax compliance rate from 70 percent to 90 percent over the review period.
As part of expanding the tax base, Treasury has proposed introducing Value Added Tax to Education services which are currently tax exempt to make education accessible to learners.
However, Treasury notes that the benefit of the exemption is not uniform across all learners due to differences in fees charged and services provided.
It says some schools provide services that are not directly related to education such as swimming thereby creating unfairness since swimming is a vatable service when offered outside school.
"To remove this discrimination, there is need to impose VAT on the additional services. In this respect, the government will explore the introduction of VAT on services provided by schools but are not directly related to education," Treasury notes in the draft proposals.
This means all economic-related services offered by schools that would ordinary attract VAT when offered elsewhere will henceforth be vatable.
These include catering services, conferencing, camping, school bus hire services, bee keeping, dairy farming and mortuary services.
"Appropriate threshold of the services will also be explored," Treasury said.
Kenyans have until October 6, 2023, to submit their views to Treasury on the proposals.
