Listening to the Treasury Cabinet Secretary tell parliamentarians during a retreat in Naivasha that claims of over-taxation are a narrative created to mislead Kenyans had me laughing so hard, I almost dropped my calculator.

When exactly did this revelation strike him? Because for years, Kenya’s business environment has been groaning under a tax burden so heavy that even the strongest enterprises are buckling. Business owners, investors, and consumers alike have been sounding the alarm, yet here we are, being told it’s all in our heads.

As successive governments and the Kenya Revenue Authority step up their tax collection efforts, what was once just a pinch is feeling like a chokehold. Much as the government insists these measures are necessary to boost revenue, businesses see them as nothing short of punitive and unsustainable.

Truth is that many traders are struggling to meet their tax obligations while maintaining profitability, leading some to shut down or operate informally to evade the heavy tax burden.

As a matter of fact, instead of fostering business growth, the high taxation levels seem to be pushing entrepreneurs out of the formal economy, reducing the government’s tax base in the long run. With businesses already grappling with high operating costs — including expensive electricity, unstable fuel prices, and the rising cost of raw materials — additional pressure of increased taxation cannot help the economy grow.

The introduction of VAT on fuel, for instance, has had a ripple effect across multiple industries, driving up transport and production costs. Consequently, businesses have been forced to pass these costs onto consumers, leading to higher prices for essential goods and services.

New tax measures keep appearing like an endless parade of unwelcome guests —minimum tax, digital service tax, excise duty increments — each one tightening the noose a little more. Small and medium enterprises (SMEs), the lifeblood of Kenya’s economy, are finding it especially tough to survive.

Frequent amendments to tax laws create uncertainty, making it difficult for businesses to plan for the long term. Investors, both local and foreign, are often caught off guard by sudden tax changes, diminishing confidence in Kenya as a stable investment destination. While the government seeks to maximise revenue collection, it risks pushing businesses and potential investors away, ultimately hurting the very economy it seeks to strengthen.

While it is the duty of the tax authority to ensure compliance, raids, freezing of business accounts, and heavy penalties for minor infractions create a hostile environment for business operations.\Many businesses fear the taxman not just because of the taxes themselves, but because of the enforcement tactics that can cripple operations overnight. This approach discourages voluntary tax compliance and fosters a culture of fear rather than cooperation between businesses and tax authorities.

While SMEs and established companies struggle under the weight of multiple taxes, a significant portion of the informal sector operates outside the tax system. This creates an unfair playing field, where compliant businesses are penalised while those evading taxes enjoy competitive advantages. The government’s failure to adequately incorporate the informal sector into the tax bracket means the tax burden remains unevenly distributed, further straining legitimate businesses.

The government must find ways to expand the tax base without overburdening compliant businesses. Instead of continuously increasing tax rates, efforts should focus on widening the tax net by bringing more informal businesses into the fold through incentives and simplified compliance processes. A friendlier tax environment will encourage more enterprises to register formally, ultimately boosting revenue collection without suffocating existing businesses.

— The writer is People Daily’s Business Editor