The government is exploring avenues of increasing tax collection at source in an effort to increase revenue.
With the state targeting Sh3 trillion in the current financial year, Trade and Investment Cabinet Secretary Moses Kuria says increasing taxes will be unsustainable.
Betting companies must now pay taxes daily in a pilot programme that saw Kenya Revenue Authority (KRA) interlink its tax system with the betting sector to track the 15 percent tax on betting, gaming and lottery as well as the 20 percent withholding tax on winnings collected from punters every day.
He said revenue collections from betting firms had gone up and had the potential to increase four fold.
Treasury data shows that withholding tax on winnings from betting jumped by 116.9 percent to Sh1.008 billion last December from Sh465 million in the same month in 2021.
This reflects an early success of the decision by the taxman to plug into the platforms of betting and gaming companies to allow real-time computation of taxes.
Kuria said a general increase in taxes puts off investors leaving a few taxpayers bearing the burden of the majority who do not remit.
Local taxing regime has been marred by a lack of clear tax policy objectives, erratic changes in the tax code and multiple taxations at the national and county levels of government stifling business operations.
“It is true we are turning to higher taxes not higher revenues, we are having a conversation with government on why more taxes don’t necessarily mean more revenue,” said Kuria said in an interview on Citizen TV.
The CS added that collection of taxes at source are some of the measures that will enable KRA to collect at up to Sh5 trillion if properly implemented.
The proposal comes at a time many Kenyans and businesses operating locally are struggling to keep up with the increasing taxes.
KRA has already proposed an increase in Excise Duty (Excise Goods Management System) (Amendment) Regulations, 2023, which seeking to increase the rate of excise stamps for bottled water, juices and any other non-alcoholic drinks, cosmetics, alcoholic beverages, tobacco and nicotine products and export products subject to excise with effect from 1st March 2023.
The proposal comes barely four months after a 6.3 percent inflation adjustment on specific excise tax rates that was effected on October 1 2022, impacting cosmetics, confectionary, alcoholic and non-alcoholic beverages including bottled water, and tobacco and nicotine products, among other products.
Three months before the inflation adjustment, there was an increase in excise taxes from July 1, 2022, by between 10 percent and 20 percent through the Finance Act, 2022.
Kuria says rather than increasing the taxes a more efficient tax administration would bring in more revenue.
While acknowledging that the current tax regime is too punitive, Kuria said that there is need to re-engineer the tax systems to be more predictable.
“We are working to create Medium Term Revenue Framework (MTRF) that will check how new taxes are levied. On excise duty for example I believe we can have prepaid excise taxes- we are doing a pilot on that.” Noted Kuria.
