Economists have raised questions over the government’s proposal to increase taxes in the budget policy statement for the year 2024/2025.
Former Laikipia Governor Ndiritu Muriithi, speaking at a conference held at the Nairobi Sarova Hotel, questioned the government's decision to increase taxation in the policy by Ksh324 billion.
“Taxation will go up between this current financial year, into the next one by Ksh324 billion, it does not look like a lot, it is 12%. But when you look at it over a 2-year period, it will be a whopping 44%,” Muriithi lamented.
He elaborated that the increase in taxes represented a 12% rise from the previous year. However, he noted that this was part of a trajectory that would culminate in a 44% increase over two years and a 58% increase in the following year.
According to the former governor, the government may be unable to raise the targetted amount which may result in a widening deficit in the country's revenue collected and budget projections.
However, the government has mapped out strategies that aim to increase the tax base and revenue collections to achieve the target.
In the Medium-Term Draft 2024 Budget proposal, presented to Parliament on February 15, the government plans to introduce several taxes.
For instance, it aims to implement a withholding tax on payments for goods supplied to the government, mirroring the existing tax on services, as an advance tax measure.
Furthermore, the proposal includes plans to introduce taxes on insurance policies and Value Added Tax (VAT) on educational services.
However, the introduction of the VAT will exclude basic and early childhood education.
Further measures that aim to increase the revenue collected from taxes include the introduction of a motor vehicle circulation tax payable annually by motor vehicle owners.
The motor vehicle circulation tax paid by motorists to utilise public roads will be computed based on various factors. These include the value of the vehicle, as well as its engine and seating capacities.
Additionally, the government has set its sights on the development of a framework that provides for the introduction of a carbon tax.
