Kenyans may soon face another spike in taxes, as indicated by Cabinet Secretary Prof. Njuguna Ndungu, so as to help stimulate economic growth and support the government’s development objectives.

This follows concerns that current tax contributions are not enough to fuel substantial economic growth and drive the nation’s development plans forward.

Speaking on Friday, August 11, at a joint retreat involving committees from the National Assembly and officials from the National Treasury, Ndung’u emphasised the need for Kenyans to prepare for the possibility of heightened taxation.

This measure, he suggested, is crucial to stimulate economic growth and support the government’s developmental objectives.

Ndung’u noted that tax contributions from the private sector remain insufficient, casting a shadow over the prospects of significant economic expansion within the country. He stressed the urgency of raising revenue domestically, underscoring that reliance on debt and external borrowing does not yield the tangible development required for sustainable progress.

“We need to raise revenue. Taxation provides the basis for growth, reliance on debt and borrowing on other people’s savings will not yield tangible development, hence the need to raise revenue from domestic sources,” a statement from Treasury read in part.

Treasury said that taxation provides the fundamental framework for growth, and that it’s essential to generate revenue from within the country rather than relying on external sources.

Kenyan tax regime operates on a progressive structure, meaning that the amount of taxes paid corresponds to one’s income, the CS noted, and acknowledged that while the prospect of increased taxation might be unsettling, it forms the bedrock for investment, infrastructure development, and overall economic growth.

However, economists will contradict this call, arguing that consumption taxes are regressive and a barrier to economic growth. In the long run, they associate this with lower revenue collection.

In the face of potential financial strain, Ndung’u offered a glimmer of hope, projecting a 5.5 per cent growth in the Kenyan economy for the year 2023. This optimism is attributed to the anticipated recovery of the agricultural sector, which was hit hard by a drought in 2022. Additionally, the reopening of international tourism is expected to contribute to the growth trajectory.

The services sector is considered the driving force behind Kenya’s Gross Domestic Product (GDP). The CS also emphasized the positive impact of increased government investment in infrastructure projects, which are poised to accelerate economic growth.

Despite these positive forecasts, risks that could hamper projected growth abound must be addressed. As part of its strategy for more prudent resource management, the Treasury has initiated a review of donor-funded projects that have stagnated. The aim is to determine the viability of these projects and their contribution to national development.