Government Spokesperson Isaac Mwaura has defended the proposed tax reforms in Kenya, emphasizing that the amendments in the Tax Laws (Amendment Bill) 2024 and the Tax Procedures (Amendment Bill) 2024 aim to enhance the quality of life for Kenyans while ensuring sustainable economic growth. Mwaura’s remarks come in the wake of ongoing debates surrounding the proposed tax changes, which are intended to address the country’s growing fiscal demands and improve revenue collection.
Speaking to the press, Mwaura assured Kenyans that the government had considered their views during public participation sessions before drafting the bills. “These bills were subjected to extensive public participation, giving Kenyans a platform to express their views and propose recommendations,” he said. The government aims to strike a balance between increasing revenue and improving the lives of ordinary citizens.
One of the major changes proposed in the tax reforms is the introduction of the digital marketplace tax, which seeks to expand the country’s tax base by taxing services such as taxi-hailing, food delivery, and freelance digital services. Although the move may lead to an increase in the cost of travel and food, Mwaura believes it is a step forward for the country’s digital economy. “This move is essential in ensuring that digital service providers fairly contribute to the economy,” Mwaura remarked, adding that this would bring Kenyan tax systems in line with global best practices.
Alongside the digital tax measures, the government is also proposing the Significant Economic Presence Tax on income derived from services offered by non-resident entities operating in Kenya’s digital marketplace. This, Mwaura explained, would ensure that foreign digital businesses contribute to the country’s economy at fair rates, further strengthening the local tax system.
The proposed amendments also focus on improving the well-being of Kenyan employees. The reforms include raising non-taxable benefits, which would make allowances for meals, non-cash benefits, and gratuity more favorable for workers. This, according to Mwaura, will help boost employees’ disposable incomes and improve their overall standard of living.
In a bid to promote long-term financial security for workers, the amendments propose enhanced deductions for registered pension and retirement contributions. These changes are designed to help both individuals and employers save more effectively for the future. Furthermore, the reforms allow contributions to the Social Health Insurance Fund and Affordable Housing schemes to be deductible, which Mwaura stated would increase workers’ take-home pay while advancing health and housing goals.
A major highlight of the reforms is the restructuring of the National Health Insurance Fund (NHIF) into the Social Health Authority (SHA). Since the transition on October 1, over 14 million Kenyans have registered under the new health insurance system, which provides improved access to healthcare. Mwaura highlighted the success of SHA-compliant facilities in providing free treatment for chronic conditions such as cancer, diabetes, and kidney disease. This shift is expected to alleviate financial burdens on Kenyans and improve the quality of healthcare across the country.
Another notable benefit of the proposed tax changes is enhanced county government funding. The amendments aim to ensure that devolved units receive funds from the national government even if there are delays in the passage of the Division of Revenue and County Allocation Bills. This will help prevent disruptions in service delivery at the county level, addressing a common challenge in the absence of such measures.
The reforms also include provisions to promote fair and competitive business environments by enhancing the ease of doing business in Kenya. Mwaura highlighted adjustments to the Investment Promotion Act that will streamline foreign investment registration and support Kenyan businesses. Additionally, amendments to the Public Procurement and Asset Disposal Act mandate that at least 40% of government procurement should come from local manufacturers, a move expected to stimulate economic growth, create jobs, and boost Kenya’s manufacturing sector.
In conclusion, Mwaura expressed optimism that these amendments would play a crucial role in stabilizing the Kenyan economy. With the country’s debt reduced from 73% of GDP to 68%, the government aims to reduce reliance on foreign debt by increasing local revenue through fair tax reforms. This, Mwaura stressed, would secure financial stability for future generations and help build public trust by ensuring efficient and transparent use of public resources. Kenyans, he assured, can expect better service delivery in sectors such as health, housing, and education as a result of these reforms.
