Closing Tax Loopholes: Kenya’s Ambitious Plan for Economic Turnaround

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It was a cold Wednesday morning when Treasury released the draft 2023 Budget Policy Statement, outlining measures to seal tax loopholes and expand the country’s tax bracket. The directive had come from President William Ruto, who had acknowledged that despite tax collection registering an improvement over the years, the country still had the potential to get more than Ksh2.03 trillion.

The government had a plan to scale up revenue collection efforts to Ksh 3.0 trillion in the FY 2023/24 and Ksh 4.0 trillion over the medium term. The Budget Policy Statement stated that government agencies responsible for collection and enforcement of tax policies will have the capacity to monitor mobile money transactions. This was a bold move, as it would integrate mobile money systems within the domains of telecommunication companies with tax collection and enforcement agencies, making surveillance possible.

The government also intended to roll out the electronic Tax Invoice Management System (eTIMS), reduce the Corporate Income Tax (CIT) gap from 32.2 percent to 30.0 percent of the potential as envisaged in the KRA Corporate Plan, and integrate the tax system with the Telecommunication companies (Telcos). This was a significant step towards ensuring that tax cheats are forced to pay their fair-share.

The draft 2023 Budget Policy Statement also outlined measures to arrest taxes that are lost in counterfeit businesses. The prevalence of counterfeit excisable products and stamps in the market would be addressed through formation of a multi-agency team to investigate the source of counterfeits and take necessary action. Members of the National Police Service (NPS), the National Intelligence Service (NIS) and other agencies would use information available to be more effective in their activities.

Treasury was confident that government agencies would not fail on the presidential directive that ordered for an expansion of the national tax bracket. Kenya was a global leader in financial innovation, with access to formal financial services standing at 83.7 percent in 2022 largely attributed to the progress made by Kenya to expand financial access through various channels including mobile money financial platforms.

As the draft 2023 Budget Policy Statement was released, Kenyans across the country held their breath. They knew that this was a decisive moment for the country’s economy. The government’s plan was ambitious, but it was also necessary. It was time for tax cheats to be held accountable, and for the country to unlock its true potential. The government had to act fast and decisively, and Kenyans were ready to support them.

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