President William Ruto used his first address to Parliament last week to spell out his tax plan, proposing a wealth tax targeting the super-rich.
The idea of a wealth tax to ease the pressure on traders’ sale revenues and workers’ incomes will definitely resonate with many Kenyans, who have genuine concerns about the many taxes they have to pay.
It also aligns with the President’s ‘hustler’ campaign promise to help small traders grow their businesses.
However, the new government needs to be alive to the pitfalls of administering a wealth tax that have made only a few countries go that direction and past efforts to introduce it in Kenya stall in Parliament.
Critics of imposing a tax based on a person’s net worth also cite its potential to encourage tax evasion and drive away wealthy investors.
Given the reservations about the practicability of enforcing the wealth tax in Kenya, which has a small super-rich class any way, the government’s best bet at increasing its tax collection still lies in casting the tax net wider and fighting tax evasion.
In any case, one of the government’s stated aims in supporting micro, small and medium enterprises through initiatives like the Hustler Fund is to have them grow into strong businesses that can be relied on to pay taxes.
The Kenya Revenue Authority has in recent years also been building its capacity to tame tax evasion.
It could do with support to strengthen its intelligence unit and voluntary disclosure programme thathas enabled it to recover billions of shillings in hidden wealth from tax cheats.
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Note: The results are not exact but very close to the actual.
