U.S. Ambassador to Kenya, Meg Whitman, has expressed concerns about President William Ruto’s proposal to increase Kenya’s tax rate from 14% to 22% by the end of his tenure.
The president has consistently defended his tax proposals, saying Kenya can only develop with taxation and not external loans.
But his proposals have been criticised by Kenyans who feel the move will overburden them.
On Wednesday night, the US Ambassador Whitman, who spoke on Citizen TV’s JKLive Show underscored the significance of maintaining consistent tax policies to ensure a stable economic environment in Kenya.
“Taxation is a global issue, and American companies often highlight the need for Kenya to keep taxes low and stable,” Whitman remarked. “Businesses plan their investments with a long-term perspective, typically over five to seven years. Therefore, it’s crucial for tax rates to remain consistent during that period.”
Whitman advocated for expanding the tax base through job creation rather than merely increasing tax rates.
“There are two methods to boost tax revenue: raising rates or broadening the tax base by increasing the number of taxpayers,” she explained. “This is why job creation is vital. When more people have well-paying jobs with steady incomes and benefits, they contribute to the tax base, reducing the burden on existing taxpayers.”
President Ruto has defended his administration’s tax strategy, which aims to raise the country’s average tax rate from 14% to 16% by the end of this year, and eventually to between 20% and 22% by the end of his term.
Ruto acknowledged the economic challenges this plan might impose on Kenyans but emphasized its long-term benefits.
“My objective is to elevate Kenya’s tax rate to 16% this year from the current 14%, and to between 20% and 22% by the end of my term,” Ruto stated. “Although this will be challenging and might face opposition, I am confident that in the long run, Kenyans will recognize that the money we borrow from institutions like the World Bank essentially comes from the savings of other countries.”
Whitman’s and Ruto’s comments reflect the ongoing debate about balancing tax rates and economic growth in Kenya.
