It seems that Kenya’s President William Ruto has been under increasing pressure from the International Monetary Fund (IMF) to tax all essential goods in Kenya.
The IMF has long argued that this measure is necessary to increase government revenue and reduce the budget deficit. However, the Kenyan government has been reluctant to tax essential goods in the past, due to concerns that it would place a disproportionate burden on the poor.
According to Business Daily, a Kenyan news publication, Njuguna Ndung’u, Kenya’s treasury secretary relayed plans to stop the zero-rating of value -added tax (VAT) on the supply of several products including maize, flour, cooking gas, ordinary bread, medicaments, agricultural pest control products, and animal feeds.
According to Business Insider Africa, essential supplies, including locally assembled mobile phones, motorcycles, electric bicycles, solar batteries, and electric buses, which are currently VAT zero-rated are not exempted from this new proposed taxation law.
In recent months, the IMF has stepped up its pressure on Kenya, warning that the country's rising debt levels are unsustainable. The IMF has also said that Kenya needs to do more to boost its tax revenue, in order to reduce its reliance on borrowing.
President Ruto has said that he is committed to working with the IMF to address the country's economic challenges. However, he has also said that he will not tax essential goods unless he is convinced that it is the only way to save the economy. It is unclear how President Ruto will resolve the issue of taxing essential goods. However, it is clear that he is under increasing pressure from the IMF to do so.
Some experts have argued that taxing essential goods in Kenya would be a mistake. They argue that it would disproportionately harm the poor and make it more difficult for people to afford basic necessities. They also argue that it would stifle economic growth.
Other experts have argued that taxing essential goods is necessary to improve Kenya's public finances. They argue that the government needs the additional revenue to fund essential services, such as education and healthcare. They also argue that taxing essential goods can help to reduce the country's reliance on foreign borrowing.
Ultimately, the decision of whether or not to tax essential goods in Kenya is a complex one. There are strong arguments to be made on both sides. President Ruto will need to carefully weigh the pros and cons before making a decision. If implemented, this tax law will have serious repercussions on the middle-class and the poor, and it will disincentivize Kenyan citizens and residents to be productive.