Education sector top target as Treasury proposes six new taxes
President William Ruto’s administration is planning to implement several new taxes next year as the National Treasury seeks to boost revenue collection due to mounting debt repayment pressures.
These proposed taxes will have implications for households and businesses, even as the private sector’s call for a national tax policy is temporarily put on hold.
One significant change is the potential introduction of Value-Added Tax (VAT) on education services, currently exempted. This would mean that services provided by schools that are not directly related to education, such as swimming lessons, taekwondo, chess, and skating, would become subject to VAT.
This comes at a time when Kenya is transitioning to the competency-based curriculum (CBC) education, where such extra-curricular activities are often offered for an additional fee.
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Similarly, insurance services, which are currently VAT-exempt, could also face taxation under these proposals. To address climate change, Kenya is considering a domestic carbon tax on fossil fuels, aligning with global efforts to promote clean energy and the “polluter pays” principle. This tax would apply to vehicles and equipment using fossil fuels.
Additionally, coal, a fossil fuel, may see new excise duty as part of the country’s efforts to combat climate change. The government is exploring a motor vehicle circulation tax, payable annually based on vehicle make and engine capacity.
In case the Kenya Revenue Authority (KRA) falls short of its collection targets, the government may introduce a surcharge tax, adding an extra tax on top of existing rates.
President Ruto’s primary goal is to increase revenue to fund the budget, especially in light of the high cost of debt repayment. The International Monetary Fund (IMF) estimates Kenya’s tax-to-GDP ratio at 25%, while the current collection stands at approximately 14% of GDP. The government aims to achieve revenue equivalent to 15.8% of GDP.
Education sector top target as Treasury proposes six new taxes
