• Increasing the VAT rate to 18 percent would give government an extra Sh65 billion annually.
• Increasing VAT to 18 percent would harmonise tax rates with Uganda and Tanzania.
President William Ruto wants to increase tax collections to restore Kenya's public finances.
The simple way to do that is to increase the rate of VAT in Kenya from 16 to 18 percent.
Uganda and Tanzania have 18 percent VAT and want Kenya to match that so there is a level paying field for all companies in East Africa. Increasing VAT to 18 percent would be good for relations with our neighbours.
VAT collections last year were Sh523 billion so the Kenya Revenue Authority would get an extra Sh65 billion by this simple increase.
Businesses can reclaim Input VAT against Output VAT paid to the KRA so this could easily be absorbed by the private sector.
Prices would rise by just over one percent on many products but again that would hardly be noticed by most Kenyans. There is an argument that VAT is regressive as a sales tax is paid equally by the poorest and does not particularly penalise the rich. But increasing VAT is a much fairer way to tax those outside the tax system than the one percent turnover tax targeting the jua kali sector.
So let's increase VAT to 18 percent.
Quote of the Day: "Africa is the richest continent on earth with regard to raw materials. The paradox is that it is also the poorest in terms of the living conditions of its people."
The Kenyan politician was born on January 7, 1945