The Kenyan government has recently announced increased taxation on essential commodities and services. This includes taxes on cooking gas, bank fees, and gambling and winnings in the country. The increase is specifically aimed at cushioning the knock-on effect of the Ukraine war on Kenya. The cost of fuel and fertilizer is predicted to soar in Kenya and elsewhere soon as Europe, and the globe enters an economic recession. 

The move by Kenya has been supported by the International Monetary Fund. IMF is a global organization based in Washington DC. It is made up of 190 countries and aims to promote financial growth and stability in the economies and business relations of countries around the world.

Increased Revenue

In a review of Kenya’s diligent tax policy measures over recent years, the IMF reported a far stronger revenue collection for the country in 2022. This is expected to be particularly true for this coming June. Aside from a 16 percent levy on cooking gas, excise duty on airtime and data is being raised to 20 percent. Likewise, the duty on bank fees and commission on loans has been set to 20 percent. 

Though Kenya’s gambling and betting operators are largely to thank for helping establish better revenue collection in Kenya through electronic methods such as M-Pesa, it, however, will also not be escaping the tax increase. Duty on all gambling and winnings has been increased to 7.5 percent.

In a recent statement following the review, IMF’s Mission Chief to Kenya, Mary Goodman, reaffirmed her organization’s findings and their support for Kenya’s financial decision-making. The IMF believes the country has taken the correct measures to buffer its economy from the coming global recession. 

Minimal Effects

Patrick Njoroge, Governor of the Central Bank of Kenya, believes that, aside from fuel and fertilizer costs, the war in Ukraine will not greatly affect the country’s imports. He says Russia accounts for only 1.8 percent of Kenya’s overall imports, being made up of fertilizer, wheat, iron & steel, and various other products. This totals around Sh38.64 billion. Ukraine accounts for even less than 0.9 percent of imports into Kenya. These commonly include wheat, soybeans, legumes, and a few others, totaling around Sh19.32 billion. Kenya imported around Sh2.15 trillion in goods in 2021.

The IMF has been calling for reforms in the taxation of commodities and services for the past decade in Kenya and elsewhere. They believe that with improved taxation, as well as social protection programs, the most financially vulnerable can be better protected from future economic hardship. 

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