IMF backs Ruto's plan to raise taxes, target cheats, expand base

Kenyan President William Ruto (right) with IMF Managing Director Kristalina Georgieva. The IMF has backed Ruto's fiscal consolidation plan to raise more revenue in Kenya. PHOTO | FILE | PCS

By JAMES ANYANZWA

More by this Author

The International Monetary Fund (IMF) has backed Kenya’s President William Ruto on his revenue mobilisation plan; that includes raising taxes, targeting cheats and the

expanding tax base even as it raised concerns over the country’s high cost of living.

IMF Resident Representative for Kenya Tobias Rasmussen told The East African that high prices of essential goods burdened households across the world and suggested that Kenya needed to cushion those in greatest need while keeping the budget deficit in check.

“This calls for increased revenue mobilisation and targeted interventions, such as cash transfers to the poor. The IMF-supported programme in Kenya places strong emphasis on these areas,” Rasmussen said.

Kenya targets tax revenues above 17.8 percent of GDP in the 2023/2024 and above 18 percent of GDP over the medium term.

Tax reforms

As part of its economic turnaround plan, Nairobi has set its eyes on a Ksh3 trillion ($24 billion) revenue collection by the Kenya Revenue Authority (KRA) in the 2023/2024 fiscal year and Ksh4 trillion over the medium term through tax administrative and policy reforms.

These include expansion of the tax base by bringing in the informal sector – which has an estimated potential of Ksh2.8 trillion ($22.4 billion) – and taxing rental properties, according to the Kenyan Government Budget Policy Statement of 2023.

The Kenyan National Treasury has also proposed to integrate the KRA tax system with telecommunication companies to monitor mobile money transactions on a real-time basis following concerns of possible under-declaration on transactions.

Other measures are for the Customs and Border Control to leverage on technology and enhanced data analytics.

Last year, Ruto revived a proposal to impose higher taxes on Kenya’s super-rich and high-income earners.

“The IMF has welcomed the new administration’s firm stance on reducing debt risks, backed by strong actions to preserve fiscal discipline in a difficult environment.” Rasmussen said in a statement.