IMF backs Ruto’s plan to raise taxes
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IMF backs Ruto's fiscal consolidation plan to raise taxes and target cheating in a bid to increase government revenue
IMF backs Ruto’s fiscal consolidation plan to raise taxes and target cheating in a bid to increase government revenue.
The International Monetary Fund (IMF) has approved Kenyan President William Ruto’s proposal to increase revenue, which calls for raising taxes, going after cheaters, and broadening the tax base—despite its concerns about the high cost of living in the nation.
Tobias Rasmussen, the IMF’s resident representative in Kenya, claimed that rising prices for necessities impacted people all around the world and urged that Kenya should provide relief to those who are most in need while limiting the budget deficit.
“This calls for increased revenue mobilization and targeted interventions, such as cash transfers to the poor. The IMF-supported programme in Kenya places a strong emphasis on these areas,” Rasmussen said.
Kenya targets tax revenues above 17.8 percent of GDP in 2023/2024 and above 18 percent of GDP over the medium term.
As part of his economic turnaround plan, Ruto 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.
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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 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.
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