Raise VAT to equal Uganda, Tanzania

In Summary

• The standard rate of VAT is 16 percent in Kenya compared to 18 percent in Uganda and Tanzania

• Sales tax or VAT is paid by all consumers including those in the informal economy

The persistent rise in taxes is very unpopular with the public, even if it has been forced on the government by the debt inherited from the previous regime.

The debt rating agency Moody's has just downgraded Kenya to B3 as investors consider it more likely that Kenya will default on its debt.

The Ruto government has been scrambling to reduce the government deficit by removing subsidies (including on diesel and kerosene) and increasing taxes ( housing levy, NSSF, NHIF, 35% top rate of PAYE, etc).

At a time of high global inflation, this makes life very difficult for ordinary Kenyans. This particularly applies to employees in the formal sector whose taxes will increase dramatically.

Increasing VAT from 16 to 18 percent would generate at least Sh65 billion in extra revenue for the KRA and be paid by all Kenyans according to how much they consume.

Increasing VAT to 18 percent would also harmonise sales tax with Uganda and Tanzania who have repeatedly complained that Kenya is undercutting them with lower rates.

Increasing VAT to 18 percent will still be inflationary but at least it will be paid by all Kenyans, and not just those in the formal sector.

Quote of the day: "If you want to steal, steal a little cleverly, in a nice way. Only if you steal so much as to become rich overnight, you will be caught."

Mobutu Sese Seko
The President of Zaire (DR Congo) fled to France on May 16, 1997

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