Tax hike fears as Kenya readies for fiscal reforms

NAIROBI - Workers and companies could soon be hit with more taxes as the Government moves to reform the income tax law.

The National Treasury is expected in a week’s time to publish draft income tax legislation that seeks to radically overhaul the country’s outdated income tax laws

Treasury Cabinet Secretary Henry Rotich said last Friday the Government was keen on overhauling the 1974 Income Tax Act in a bid to increase revenue, improve tax administration and seal tax loopholes but declined to comment on whether or not the changes would see a rise in taxes.

While ruling out fresh borrowing to finance Government spending, Mr Rotich maintained that the proposed tax reforms and austerity measures already in place would help contain the country’s budget deficit to 6.4 per cent.

He also cited cutback on domestically-funded infrastructure projects as a way to maintain the fiscal discipline needed to maintain economic growth.

The Government has insisted that it will maintain the gap between what it can raise from taxes and the expected budget at Sh535 billion to achieve a budget deficit of 6.4 per cent of GDP, down from 8.5 per cent recorded in the last financial year.

Treasury introduced austerity measures, including banning foreign trips, as well as cuts on local trips, training and hospitality, which went to finance the repeat elections and mitigate the drought effect as well as finance free secondary education.

However, according to the latest Treasury projections, the fiscal gap is expected to be bigger and estimated at Sh691 billion, which would put it at 7.9 per cent of the GDP.