President Ruto's Aggressive Drive for Revenue in 2023

In 2023, President William Ruto shocked Kenyans with a series of comprehensive tax measures influenced by the country's partnership with the International Monetary Fund (IMF).

In his Jamhuri Day speech, the President defended these measures as crucial to avert looming economic turmoil. The focal point of this financial strategy was the controversial Finance Act 2023 passed by the National Assembly in June to generate an additional Sh211 billion to accommodate rising debt service costs within an expanded budget. The implementation of a 1.5 per cent housing levy, the doubling of VAT on petroleum products to 16 per cent, and increased mobile money transfer fees have stirred distress among both employers and employees.

The Finance Act 2023 went beyond traditional tax domains, extending its reach to the digital landscape by introducing taxes on the transfer of digital assets and tripling the turnover tax to three per cent. Mobile phone users felt the pinch as the excise duty climbed from 12 to 15 per cent, prompting leading telecom company Safaricom to adjust its M-Pesa fees upward by three per cent. Advertisers promoting alcoholic beverages, betting, gaming, lotteries, and prize competitions across various media platforms faced a new hurdle with the introduction of a 15 per cent excise duty.

The Act revamped the tax brackets for monthly employment income, introducing two additional tiers. Earners above Sh500,000 would now face a 32.5 per cent tax rate while those surpassing Sh800,000 were subject to a 35 per cent tax rate. In July, club entrance and subscription fees became taxable benefits, providing employers with the option to deduct this expense from their income.

Imported glass bottles, excluding those for pharmaceutical products, faced a hike in excise duty from 25 to 35 per cent. Content creators on social media were not exempt, as the Act imposed a withholding tax of five per cent for residents and 20 per cent for non-residents without a permanent place of digital content monetization. The tax ripple extended to electronics dealers including mobile phones as a 10 percent excise duty on imported cell phones led to challenges and shortages for smartphone importers.

To ensure tax compliance among small businesses, the Kenya Revenue Authority (KRA) introduced Revenue Service Assistants. Meanwhile, state departments increased fees and fines for services like passport processing and marriage certificates.