Kenya: Tax measures and budget alignment

Kenya's economic strategy was recently scrutinized on a TV news interview on CNBC Africa with a focus on budget policy and revenue targets for sustainable growth. Fredrick Ogutu, a senior associate tax practice at Bowman, shed light on the specific measures outlined in the budget aimed at achieving the medium-term revenue strategy. The budget emphasized expanding the tax base by targeting the hard-to-tax informal sector and the digital economy. By introducing measures such as withholding tax and excess duty on digital services, the government aims to bring more individuals and businesses into the tax net and generate the anticipated revenues. However, the fairness of these tax reforms has come under scrutiny, especially in relation to the motor vehicle tax and VAT on financial services. While the government expects to collect significant revenue from these measures, there are concerns about the potential impacts on businesses and the overall business environment. Many companies have expressed discontent and feel stifled by the new tax bills, which could lead to reduced profits, job cuts, and decreased business enthusiasm. Additionally, the proposed change to withholding tax on goods supplied to public entities aims to tackle tax evasion and ensure entities are accountable for their tax obligations. Overall, the tax reform measures in Kenya are aimed at broadening the tax base and increasing revenue generation, but their impact on businesses and the economy remains a topic of debate.