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Government and Policy

The Tax Guillotine Of 2025 That This Bread-Based Government Is Proposing Must Be Rejected Loudly

BY Steve Biko Wafula · January 23, 2025 07:01 am

KEY POINTS

Raising VAT to 18% while removing exemptions on basic goods such as milk, bread, and ugali will further crush low-income households. A majority of Kenyans spend up to 50% of their income on food. Increasing VAT means fewer meals on the table and more children going to bed hungry. 

Kenyans are no strangers to oppressive taxation. For years, the government has dug deeper into the pockets of its citizens, imposing tax after tax under the guise of funding development projects. Yet, these funds often vanish into the abyss of corruption, leaving the nation’s roads, hospitals, and schools in a perpetual state of decay. The Finance Bill 2025, however, marks an alarming escalation—an all-out assault on the livelihoods of millions. If passed, this bill will push Kenya’s struggling economy to the brink, deepen poverty, and stifle any hope of recovery.

Imagine a young family in Nakuru. They’ve just welcomed their first child, only to be slapped with a neonatal tax. While trying to secure diapers, food, and healthcare for their newborn, they must also contend with rising costs from an 18% VAT, higher PAYE rates, and a fuel levy that inflates the price of everything they consume. The dream of raising a healthy child morphs into a nightmare of financial strain. This isn’t fiction—it’s the grim reality awaiting countless families if the Finance Bill 2025 becomes law.

The proposed tax on diaspora remittances is equally devastating. Diaspora inflows were estimated at Ksh 498 billion in 2024, forming a critical lifeline for families and small businesses. Taxing these funds, which are already subject to charges abroad, will reduce their impact on local economies. Families relying on these remittances for education, medical care, and daily survival will feel the pinch. Countries like India, which boasts one of the largest diaspora populations globally, incentivize remittances rather than penalizing them, recognizing their value in bolstering domestic economies. Kenya’s approach is both counterproductive and cruel.

Read Also: Serious Drop In Taxes Collected By KRA Signals An Economy Already In Recession

Raising VAT to 18% while removing exemptions on basic goods such as milk, bread, and ugali will further crush low-income households. A majority of Kenyans spend up to 50% of their income on food. Increasing VAT means fewer meals on the table and more children going to bed hungry. Data from the Kenya National Bureau of Statistics (KNBS) shows that food inflation hit 10.8% in December 2024. These proposals will only worsen this trend, increasing food insecurity in a country where millions already face hunger.

The fuel levy hike is another dagger aimed at the heart of the economy. Fuel prices in Kenya are among the highest in East Africa due to existing levies. Adding Ksh 10 per liter will drive up transportation costs, inflating the price of goods across the board. Small traders, matatu operators, and boda boda riders will bear the brunt, passing these costs onto consumers. This vicious cycle will stifle economic activity, slowing down growth in key sectors like agriculture, transport, and trade.

The 1% mobile money levy proposed in the bill may appear small, but its impact is profound. Mobile money is the backbone of Kenya’s economy, facilitating transactions worth over Ksh 7 trillion in 2024. Taxing every payment, from school fees to medical bills, will hurt the poorest most, as they rely heavily on mobile money for daily transactions. Safaricom’s M-Pesa and similar platforms may see reduced usage as Kenyans return to cash, reversing gains in financial inclusion and innovation.

Farmers, already struggling with high input costs and erratic weather patterns, face a 5% tax on agricultural produce. Kenya’s smallholder farmers, who account for 70% of food production, will find it harder to stay afloat. Tea, coffee, and avocado exports—key foreign exchange earners—will lose competitiveness in global markets, as farmers pass higher costs to exporters. In contrast, countries like Rwanda offer tax breaks and subsidies to farmers, understanding their pivotal role in food security and export growth.

Even landowners aren’t spared. The idle land tax, set at 10% of land value, punishes ownership without addressing systemic issues like land fragmentation and underutilization. Urban and rural landowners alike will struggle to pay this levy, leading to forced sales and land grabbing by the politically connected. The government’s approach ignores the need for agricultural productivity and land development incentives, instead treating land ownership as a taxable offense.

The proposed 15% levy on internet bundles is another nail in the coffin for Kenya’s digital transformation. With the world increasingly reliant on remote work, e-commerce, and online education, making the internet more expensive will push Kenya further behind in the global digital economy. Countries like Estonia have prioritized affordable internet access, reaping significant economic benefits. Kenya, however, appears intent on taxing its citizens into digital isolation.

Sugar, chocolates, and drinks now fall under the “green levy,” framed as a public health measure. While taxing unhealthy products is common globally, Kenya’s approach lacks nuance. Without clear guidelines or public health campaigns, this levy will merely inflate costs for consumers without addressing obesity or related health concerns.

These proposals, in totality, represent a government desperate for revenue, yet unwilling to address the root causes of Kenya’s economic woes. Corruption remains rampant, siphoning off an estimated Ksh 700 billion annually. Until accountability mechanisms are put in place, introducing new taxes is akin to pouring water into a leaking bucket.

Odious debt, accumulated through mismanagement and opaque contracts, continues to drain public resources. Kenya spends over 60% of its revenue on debt servicing, leaving little for development. Adding new taxes will not solve this crisis—it will only perpetuate it. Countries like Norway have restructured odious debts and implemented stricter borrowing laws. Kenya must follow suit.

Moreover, the government’s obsession with annual tax laws creates uncertainty, discouraging investments and stifling business growth. Longer tax cycles, combined with predictable policies, are essential for fostering a stable business environment. Singapore, for instance, revises tax policies every five years, providing businesses with the certainty needed to plan and grow.

The Ruto administration’s failure to deliver on its promises is evident. From ballooning public debt to skyrocketing living costs, this government has repeatedly shown that it prioritizes its interests over those of the people. Kenyans must rise louder than ever before, rejecting the Finance Bill 2025 and demanding accountability, transparency, and a complete overhaul of the tax system.

This bill is not just another policy—it’s a blueprint for economic collapse. It must be rejected, not just in whispers, but in a deafening roar that shakes the foundations of power. Kenyans deserve better. It’s time to demand it.

Read Also: Has Kenya’s Ultra Aggressive Betting Taxes Had The Desired Effect?

Steve Biko is the CEO OF Soko Directory and the founder of Hidalgo Group of Companies. Steve is currently developing his career in law, finance, entrepreneurship and digital consultancy; and has been implementing consultancy assignments for client organizations comprising of trainings besides capacity building in entrepreneurial matters. He can be reached on: +254 20 510 1124 or Email: info@sokodirectory.com

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