Zachary Ochuodho @zachuodho
The average number of taxes imposed on goods and services expended in Kenya are higher compared to what East African neighbours are paying for the similar items and services.
In Kenya, for instance, consumers are required to pay at least seven tax regimes compared to Uganda — where the tax regimes zero on three items, Tanzania with four tax regimes and Rwanda with three tax regimes in order to support their budgets.
Although the tax charges are imposed on companies, individuals and traders, they vary depending on the amount expected to be generated from each sector — corporate tax, withholding tax, personal income tax (PAYE), value-added tax (VAT), customs, excise duty, gaming tax and mobile tax, targeting all those areas was in itself on the higher side.
According to Deloitte, analysis on the budget for 2018/19, Uganda’s taxation system majorly revolves around excise duties, VAT and income tax, while in Tanzania the taxes revolves around corporate tax, VAT, customs duties and excise duties.
In Rwanda, the charges are basically on the VAT, customs duties and excise duties. Indeed, a good tax system should be fair, adequate, simple, transparent and should be easy to collect.
Kenya’s taxation system is unbearably high and could hurt the growth of the related sectors and government revenues, with the affected firms scaling back operations or moving their businesses.
“I feel the tax change, that is probably the highest in Africa, looks discriminatory,” says John Kirimi, former Sterling Capital chief executive officer.
As Kenya attempts to widen its tax bracket, the government is targeting each sector and person in a bid to generate revenue to support its expenditure.
In the current financial year, businesses in East Africa have been forced to tighten their belt to avoid feeling the heat of increased taxes as governments look for easier ways of raising money to finance persistent budget shortfalls.
Uganda is facing an estimated revenue shortfall of USh16.7 trillion ($4.4 billion), almost half of the budget of the current (2018/19) fiscal year while Kenya, Tanzania and Rwanda are grappling with budget deficits of about $5.62 billion (Sh566.56 billion), $46 million (Sh4.64 billion) and $448 million (Sh45.3 billion) respectively.
Uganda plans to collect an additional USh15.9 trillion ($4.2 billion) from new tax measures which came into effect in July.
These include USh200 ($0.05) daily levy on social media platforms like WhatsApp, Facebook, Viber and Skype, a one (1) per cent excise duty on mobile money transaction, a USh200 ($0.05) levy on cooking oil and USh100 ($0.025) on diesel and petrol.