How Kenya's higher taxes will affect consumer demand
Key questions this article answers:
- Kenya’s 2023 Finance Act aims to boost tax revenue by increasing VAT on energy products and PAYE. What will be the impact of these new taxes on consumers?
- How will consumers regulate their buying behaviour to accommodate these new taxes?
Households in Kenya face multiple price shocks as the government implements the 2023 Finance Act, which established new income taxes that will reduce disposable income in the foreseeable future.
The new taxes align with the Kenyan government’s plan to achieve its 2023/24 budget revenue target of KES 2.96 trillion ($20.4 billion), up 16% from KES 2.56 trillion ($17.6 billion) in 2022/23.
To meet this revenue target, the government plans a 17.4% increase in tax revenues from KES 2.19 trillion (2022/23) to KES 2.57 trillion (2023/24). For context, taxes account for 87% of the Kenyan government’s planned revenue, with income tax (PAYE) and Value Added Tax (VAT) contributing the bulk (74%) of tax revenues.
Based on the Finance Act, VAT on all energy products (excluding cooking gas) increased to 16% from 8%, and Pay As You Earn (PAYE) tax on upper-band income earners (﹥KES 500,000 - KES 800,000) and (﹥KES 800,000)
Invest with Confidence, Operate with Precision.
Access economic and industry data & insight for global organisations.
Trusted by leading global organisations
