National Treasury Now Targets Educational Institutions with Six Taxes
President William Ruto’s government plans to introduce several new taxes next year as the National Treasury seeks to increase revenue amid mounting debt repayment obligations. This move is expected to impact households and businesses, complicating the private sector’s push for a national tax policy.
If the Treasury’s proposal is approved, education services in Kenya may be subjected to Value-Added Tax (VAT) at the current rate of 16 percent. This means that schools offering non-education-related services, such as swimming pool lessons, taekwondo, chess, and skating, would become taxable.
This comes at a time when Kenya is transitioning to the competency-based curriculum (CBC) education, where these additional lessons are commonly offered for an extra fee.
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Additionally, insurance services, currently exempt from VAT, may also be affected by this expansion of taxable services. To address climate change, Kenya is considering implementing a domestic carbon tax on fossil fuels, including vehicles and equipment. Coal is also slated to face new excise duty due to its contribution to air pollution and global warming.
Furthermore, the government is exploring the possibility of a motor vehicle circulation tax, payable annually by vehicle owners when acquiring insurance coverage, based on the vehicle’s make and engine capacity. If the Kenya Revenue Authority (KRA) falls short of revenue collection targets, a surcharge tax may be introduced, which would be an additional tax imposed on top of existing tax rates.
President Ruto’s administration aims to boost revenue to fund the budget and match the country’s economic potential, especially in light of high debt repayment costs. The International Monetary Fund (IMF) estimates Kenya’s tax-to-GDP ratio at 25 percent, while the current collection stands at around 14 percent of GDP, with the exchequer targeting revenue equivalent to 15.8 percent of GDP.
National Treasury Now Targets Educational Institutions with Six Taxes
