The International Monetary Fund (IMF) has recommended a staggered implementation of new tax measures by governments in sub-Saharan Africa, including Kenya, amid public backlash.
The multilateral lender notes the sustainability of new policies is dependent on a government’s ability to win over public opinion.
“Sustainability of new policies depends on the government’s ability to win over public opinion either by showing that reforms generate rapid benefits or by making a case for their desirability on longer-term grounds,” the IMF notes in a policy paper published on Tuesday.
Further, the IMF suggests delaying difficult fiscal reforms until macroeconomic conditions are favourable and compensatory measures are in place.
The call for sequencing new tax reforms comes amidst a sharp public discourse on recently legislated taxation measures including the implementation of the 2023 Finance Act.
Provisions in the Act, including the doubling of VAT on petroleum products and the legislation of a new housing development levy, charged at 1.5 percent of gross salaries and matched by employers, for instance, resulted in public petitions that threatened to derail the revenue mobilisation plan.
Subsequent tax proposals contained in the draft Medium Term Revenue Strategy, which is currently at the public participation stage have equally drawn sharp critiques from the public.
The policy document has, for instance, proposed the scrapping of reliefs under pay as you earn, setting the stage for a further reduction to take-home pay for salaried employees.
Additional proposals such as the Unemployment Insurance Authority Bill, which proposes a deduction of three percent of salaries to provide for a stipend to employees declared redundant have also drawn comparable criticism.
