Kenya’s unfair tax system could be costing US$781m

A new report by independent lobby group National Taxpayers Association (NTA), dubbed ‘Taxing Wealth in Kenya’, as seen in The Star, revealed that taxing high net worth individuals in the East African country could generate US$781 million (Sh100.75 billion).

This sum is about one-third of what the National Treasury intended to raise in the Finance Bill 2024, which was rejected.

The study recommended splitting the 7,800 high net worth individuals across the country who were included in the most recent Africa Wealth report into three groups.

The first group which would consist of Kenyans with US$1–US$3 million (Sh140 million–Sh400 million) income would pay a tax of 1,5 percent annually.

Around 5 700 are estimated to be in this wealth group, which denotes that US$171 million (Sh22 billion) in taxes could be generated.

The second group which consists of individuals with incomes of US$3 to $100 million, as per the report’s suggestion should be handed a 3 percent tax, as it has the potential to generate US$450 million (Sh58 billion) for the government.

Finally, the third category of those with incomes more than US$100 million should be required to pay a 5 percent annual tax. Around US$160 million (Sh20.6 billion) in tax income could be generated.

The NTA argues that the government must expand the tax base by incorporating an array of assets, and enhance the current frameworks for financial asset taxation and real and intellectual property taxes.

Furthermore, it proposes thorough appraisal methods for financial and real estate assets, improving on current systems and referencing global best practices.

There is also the idea of taking a graudal approach beginning with improved data collection and HNWI identification, and working up to a comprehensive wealth tax regime over a number of stages.

“Design the wealth tax to focus exclusively on HNWIs, setting a high threshold to exempt the majority of Kenyans, especially household and individual savings on which tax has previously been paid,” the report read.

According to the report, the current tax system is unfair to the poor, with those who have a monthly wage, for example, paying the government about 40 percent of their income while the wealthy only pay only a tiny percentage of their wealth. Business Insider Africa