The government is turning its sights on tax evaders among the elite professionals, with doctors, lawyers, and engineers among those in the crosshairs. Treasury Cabinet Secretary John Mbadi announced the initiative to tackle tax underpayment in these sectors as part of efforts to boost the country’s revenue collection and address budgetary gaps.
Marking 50 days in office on Wednesday, October 16, Mbadi revealed a strategy to clamp down on individuals and businesses that have been skirting their tax obligations. The disclosure comes in the background of the Kenya Revenue Authority (KRA) still falling short in revenue collections by Ksh130 billion in the financial year ending June 2024, having collected Ksh2.407 trillion, against a revised target of Ksh2.537 trillion.
The Treasury chief noted significant gaps in tax collection from certain sectors. For example, value-added tax (VAT) and income from rental properties are among areas where revenue collection falls alarmingly short.
"Instead of collecting Ksh100 billion, we are only bringing in Ksh17 billion," he pointed out. Mbadi indicated that professionals in fields like medicine, law, engineering, and accountancy are paying far less than their fair share of taxes.
To tackle this, the government plans to implement a new system that increases visibility into taxpayer activities, ensuring that professionals and landlords who currently evade taxes are brought into the fold. The initiative is part of a wider effort to broaden the tax base, which Mbadi says will help ease the burden on ordinary Kenyans.
However, he assured citizens that there would be no increase in tax rates. “Under my watch at the Treasury, I will not bring any proposal to take more money from the pockets of Kenyans, whether you are the smallest earner or the highest,” Mbadi declared. His remarks come in stark contrast to President William Ruto’s previous assertion that Kenyans were under-taxed compared to other countries.
The President has insisted on the need for higher taxes, arguing that the country’s overall tax burden is lower than in some other African nations. Ruto acknowledged, however, that pushing for increased taxes would be a tough sell, given the rising cost of living and economic pressures facing Kenyans.
Last month, Mbadi outlined plans to cut taxes in the medium term. This includes lowering VAT from 16 per cent to 14 per cent and reducing corporation tax from 30 per cent to 25 per cent. Pay-as-you-earn (PAYE) rates are also set to be slashed, although the exact reductions are yet to be specified.
The proposal is part of the Treasury’s broader strategy to enhance tax compliance, improve administration, and expand the tax base. During a budget unveiling for the 2025/26 fiscal year in Nairobi, Mbadi reiterated the government's commitment to not just widening the tax net but also easing the burden on law-abiding taxpayers.
Since President Ruto’s administration took office in August 2022, a slew of tax hikes has hit the public, from increased income taxes and fuel levies to a new housing tax and upcoming adjustments in health insurance costs. Despite the mounting tax burden, Mbadi is adamant that the new measures will lead to long-term economic progress.
As of the end of June 2024, tax compliance showed improvement, with 8,046,029 returns filed, surpassing the target by 26 per cent compared to the previous year. This progress, however, highlights the untapped potential in sectors where compliance remains lax.
