Kenya's debt dilemma: Are higher taxes the answer?

It is impossible to discuss Kenya today without referencing the elephant in the room: the country's recently passed Finance Act 2023.

This June 26 Act—in addition to the Kenyan budget—is meant to help the government raise a record revenue of KES2.57 trillion (~$18 billion). This will be 17% higher than the previous year’s revenue, reducing its budget deficit to 4.4% of GDP from 5.8% in the previous year. The government is determined to boost its revenue to enhance its fiscal position and secure funding for upcoming debt obligations.

Because of this Act, petroleum products are now charged 16% VAT like other products (against the 8% levied in the past), and a 3% housing levy shrinks consumers’ incomes and puts businesses at higher risk. Micro, Small and Medium enterprises (MSMEs) earning an annual turnover of KES25 million (~ $176,000 today) are subject to a 3% turnover tax from the 1% paid