President Ruto proposes higher tax for super rich Kenyans

In a bid to address the growing public debt crisis in Kenya, President William Ruto has proposed imposing higher taxes on the super-rich individuals in the country. This move is aimed at reducing the dependency on loans to fund the national budget and steer the economy towards a more sustainable financial path. To delve deeper into the implications and feasibility of such a proposal, Sandeep Main, the Associate Director overseeing Tax at KPMG East Africa, shared insights in an exclusive interview with CNBC Africa. Main shed light on the historical context of wealth taxation in Kenya, citing a previous attempt to introduce a wealth tax on idle land several years ago, which faced opposition and did not materialize. He emphasized the need for clarity in defining who qualifies as 'super rich' in the Kenyan context, comparing it to global thresholds like the 1.3 million dollar benchmark in France. The key challenge lies in accurately identifying and assessing the net wealth of individuals who fall under this category. When questioned about the practical implementation of such a tax, Main highlighted potential strategies that the government could adopt. He mentioned the possibility of utilizing existing tax frameworks like capital gains tax and inheritance tax, the latter being less common in African countries but prevalent in regions like the United Kingdom. Main also suggested re-evaluating the taxation structure for assets like land, potentially increasing land rent and revising tax brackets to capture a broader spectrum of affluent individuals. Expanding the tax bracket emerges as a crucial strategy to broaden the tax base and enhance revenue collection for the government. Main elaborated on the significant impact that a mere 5% expansion in the tax bracket could have on the overall revenue generation. While such measures hold promise for addressing the current debt crisis, they also raise concerns about the implications on individuals' disposable income and spending patterns. Reflecting on past taxation initiatives in Kenya, Main acknowledged previous unsuccessful attempts to implement higher tax rates on income. However, he expressed confidence in the current administration's resolve to prioritize debt reduction and fiscal sustainability. Despite global statistics indicating limited success in wealth taxation across OECD countries, Main remained optimistic about Kenya's potential to overcome these challenges by aligning tax policies with tangible improvements in public services. The conversation also touched upon the potential pitfalls of wealth taxation, with Main acknowledging the risk of tax evasion and avoidance strategies among affluent taxpayers. The Swiss example of significant tax evasion underscored the importance of robust enforcement mechanisms and policy safeguards to prevent such financial malpractices. In conclusion, the proposal to levy higher taxes on the super-rich in Kenya represents a bold step towards addressing the country's mounting debt burden and creating a more equitable tax system. While the road ahead may pose obstacles and uncertainties, the commitment of the government to enhance revenue mobilization and promote fiscal discipline offers hope for a more sustainable economic future.