PREVIEW
Treasury seeks revenue via heavier enforcement and digital surveillance as protestors hold fire
Treasury Cabinet Secretary John Mbadi has ruled out any new tax rises in his budget plan for 2025/26, arguing that greater efficiency in revenue collection will be sufficient.
Mbadi announced that the government’s focus will shift to improving tax administration and closing loopholes. The new finance bill aims to boost revenue ‘by between US$194 million and $233m – without introducing any more levies.
Instead, the government instead plans to crack down on avoidance and evasion by providing authorities with access to personal and business financial data. This idea is not new. The International Monetary Fund has frequently urged Kenya to tighten compliance. Successive governments have boosted the Kenya Revenue Authority’s investigative powers but evasion is still rampant among Kenya’s wealthy and politically-connected.
Total expenditure is set at $31 billion, slightly lower than the $32.5bn Mbadi floated in February, with a projected deficit of 4.5% of GDP. That will do little to ease the country’s high debt and debt servicing burden (AC Vol 66 No 8, Ruto’s fiscal gamble – can he break the debt trap by 2027?). In February, Mbadi introduced a $1.5bn supplementary budget financed via extra borrowing to offset a shortfall in targeted 2024/25 revenues(Dispatches 18/2/25, Treasury increases borrowing after admitting defeat on tax targets).
The decision to not introduce new taxes reflects the constraints on President William Ruto since June 2024 Gen Z protests against the multiple tax increases in last year’s proposed finance bill. After the mass protests, the laws were dropped in July but several of the measures were quietly reintroduced months later. Given the government’s unpopularity, ministers have decided that they cannot risk giving youthful protestors any cause to go back to the streets.
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