In early March 2022, US President Joe Biden proposed the Billionaire Minimum Income Tax (BMIT) for wealthy Americans. Biden wanted the tax percentage to rise to 20 from the current 8.2.
While marking the 2022 National Taxpayers Day on Friday, October 2022, President William Ruto reiterated his stance on introducing a similar approach as he seeks to expand the tax bracket.
"We must also reflect equity by shifting from the over-taxing of trade and under-taxing of wealth to enable the wealthy to bear an appropriate burden," Ruto said.
He maintained the need to operate hierarchically in matters involving revenue mobilisation, meaning that the government would focus on taxing wealth, consumption, income and trade in that order.
The wealth tax will be based on a person's net worth after deducting liabilities and will target cash, investments, real estate, business ownership and other assets based on market value.
In America, Biden's proposal seeks to increase revenue by Ksh43.7 trillion (USD 360 billion) over a period of ten years, with the changes projected to affect 700 billionaires.
His opponents, however, argue that his approach may cause an administrative burden for the Internal Revenue Service (IRS). A section of American taxpayers added that it would be difficult to determine the worth of some assets and appropriate taxation.
Biden's tax wealth suggests that if, for example, a taxpayer whose household worth exceeds Ksh12.14 billion (USD100 million) purchased stock at Ksh60,700 (USD500), then the stock’s value may have risen to 97,120 (USD800).
They will then pay taxes on the increased value of Ksh36,420 (USD300) even though they still own the stock. Households with wealth less than Ksh12.14 billion (USD100 million) would only be taxed when they sell the asset.
President Biden's reason for the move was perpetuated by his view that the country's current tax code rewards wealth and not work, an issue that has highly contributed to a growing income and wealth inequality among Americans.
Kenya's just concluded 2021/2022 financial year's revenue totalled Ksh2.031 trillion, a figure celebrated as monumental, as it was the highest annual revenue in history, having surpassed the two trillion mark on the original target of Ksh1.882 trillion.
Ruto's novel approach in the country aspires to propel the taxman to raise Ksh3 trillion by the end of the next financial year and double the current collection in five years.
Though the idea failed to sail through Parliament over the past four years, the incumbent president is confident that the move will help Kenya cut over-reliance on foreign loans to fund the national budget amid a ballooning public debt.
