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The government has announced plans to widen the tax bracket in order to collect more revenue, meaning that more pain lies ahead for Kenyans.

 Officials want to reduce or eliminate tax incentives and reliefs given in the form of tax exemptions, tax relief and allowances, the National Tax Policy released by the Treasury shows.

They also want to increase the sources of tax revenues in the agriculture, informal and digital sectors, which have been hard to tax, and review every five years the Pay As You Earn (PAYE) tax bands to provide for progressive taxation.

 The document states: “The overall objective of this Policy is to provide guidelines on taxation policy that support economic development and promote economic diversification, enhance the country’s competitive edge, and establish tax incentive schemes that are aligned to the Government’s development agenda, promote investment and foster a flexible fiscal space.”

Officials contend that the agriculture sector’s contribution to tax revenue does not match its contribution to GDP, which averages 21.4 percent.

 They lamented that previous efforts to tax the sector, including the use of turnover tax and presumptive income tax, have not yielded the expected tax revenues.

To net more taxpayers in agriculture, the Treasury wants to enhance taxation by increasing the presence of the Kenya Revenue Authority in cities and large towns, appointing tax collection agents, and explore ways of enhancing the taxation of property transfers, including land.

It also plans to roll out education programmes for farmers and informal-sector groups on taxation, and enhance collaborations and information exchanges on taxpayers between the national government and counties.

 “The economy is dominated by a large informal sector, which is difficult to tax,” the document says. “The sector is characterized by poor record keeping, cash-based transactions and limited information due to its unregulated nature.”

 Rather than taxing the informal sector, the government should instead wait for it to mature, advised tax consultant and Jomo Kenyatta University and Technology lecturer Anthony Osambo.

 “These guys have just run out of ideas. If at all we can encourage and invest heavily in farming, then we can be better as Kenyans,” he said.

He added: “[You] don’t tax primary agriculture. You let it develop into secondary agriculture and tax it there. Anybody who produces milk or maize, forget about him.

“Nobody should put a tax policy focusing on the informal sector. Let them mature into the formal sector. Let them leave the informal sector alone.”

On personal income tax, the policy states that all income derived from or accrued in Kenya will be subject to tax unless exempted under international agreements to which Kenya is party.

To ensure proper implementation of this tax, the policy proposes reviewing all income tax reliefs, such as personal, mortgage, and insurance, all thresholds and tax bands every five years to adjust them for inflation. It also proposes periodic studies on how progressive tax bands are and the optimum level of taxation.

On capital gains, the policy says studies will be undertaken to inform taxation of capital gains from transfer of property with international best practices, including the tax rate to be charged on the gain and how to address the inflation effect in the taxation of the gains.

 On the digital front, the Treasury proposes a raft of measures that it wants adopted.

 Among other things, officials want to leverage technology to detect tax avoidance and enhance compliance regarding emerging business transactions on digital or electronic platforms.

The also propose regularly reviewing the tax regime that applies to digital marketplaces to ensure optimal tax collection, as well as reviewing laws to align them with emerging technologies.

 The policy proposes that the government drop incentives that are normally given in the form of tax exemptions, tax relief, allowances, tax deferral and concessional tax rates, with the Treasury arguing that these measures erode the tax base though the incentives are aimed at promoting investments and providing relief to low-income earners and vulnerable groups.