Discussions abound on whether the forthcoming Finance Bill, 2025 will accommodate the harsh economic realities many Kenyans currently endure – or whether we even need it at all.
The Finance Act, 2024 faced its fair share of scrutiny. Some pundits hastily clouded it with thickets and brambles of half-truths, propaganda and lies. Perhaps, in this new year, we can evade that strain of malady.
The journey to drafting the Finance Bill 2025 will undoubtedly be arduous. Borrowing from the previous Finance Bills, there is an urgent need for us to rethink and reevaluate our fiscal approach. As it is often whispered, “Consistency without change is the playground of a dull mind”.Â
In this context, our revenue laws often seem to embody a frantic desire to overreach – seeking to extract more revenue at the expense of taxpayer’s businesses and livelihoods. We must resist turning thriving enterprises into smoldering ruins under the guise of revenue collection.
Conventional wisdom suggests that we should learn from our past mistakes. As the days dwindle towards another Finance Bill, it is imperative that we exercise empathy and realise that effective tax collection can only thrive in an environment that resonates with the populace, and strikes a delicate balance between quality of life and revenue mobilisation.
Achieving this balance demands sacrifices and compromises from both the government and citizens.
At the heart of this balance lies trust – a fiscal contract between the governed and the government, predicated on prudence, rationality, and shared commitment to equity.
Perhaps, instead of reflexively increasing tax rates in the next Finance Bill, further burdening already stretched taxpayers, we should explore strategic avenues to expand the tax base. There is a tendency to view higher tax rates or introduction of new taxes on existing income streams as an easy route to fast revenue mobilisation. However, the sustainability of such measures is questionable.
What Kenya needs is an efficient and equitable revenue mobilisation strategy – one that supports resilient economic growth while addressing poverty and inequality. Overtaxation risks exacerbating economic exclusion and deepening the already wide gulf of inequality.Â
Therefore, the question should not be “how fast can we boost our tax revenue mobilisation?” but rather, “how sustainably can we boost our tax revenue mobilisation?”
As a step forward, having learnt from our mistakes and acquainted with a genuinely good recollection, this fiscal year should prioritise improving tax compliance, enhancing revenue administration, simplifying return filing process, reducing redundant tax exemptions, and eliminating preferential tax treatments for foreign direct investments that offer little tangible benefit.
Sustainable economic growth requires pragmatic fiscal policies. As we gear towards the new year, let us chart a different course this time, one that not only mobilises revenue but also rebuilds trust, ensures equity and strengthens resilience in our economy.
The writer is commercial and tax lawyer, and managing partner at Baston Woodland and Company Advocates
