Tax Reforms in Kenya: Reforming Value Added Tax

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Browsing Tax Reforms in Kenya: Reforming Value Added Tax by Author "Nato, Jacob"

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    Assessing the Impact of Personal Income Tax Reform in Kenya with Administrative Data: Behavioral Responses and Distributional Implications
    (AERC, 2025) Kanina, Jane; Mugure, Josephine; Nato, Jacob; Urzainqui, David Garce’s; Fisker, Peter
    This paper leverages administrative tax data from Kenya to make several contributions to our understanding of personal income taxation in developing countries. First, we exploit recent tax reforms to credibly estimate the elasticity of income to changes in marginal tax rates from a taxpayer panel with state-of-the-art methods, a novelty in the context of Sub-Saharan Africa. We find a value of 0.3 for our sample of individuals in the upper half but not at the top of the income distribution, which conceals large disparities between inelastic public workers and a rather elastic private sector. Second, we combine administrative tax data with household survey data to address the shortcomings of each of these data sources in measuring income inequality and assess the success of income taxes and potential modifications to them in reducing post-tax income inequality. We also triangulate these data sources to quantify the compliance gap due to compliance at 23% of potential revenue, mainly attributable to self-employed workers. Finally, we rely on these tools to investigate the possibilities Kenyan policymakers have and the trade-offs they face when aiming to collect further revenue in an efficient and progressive manner.
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    Understanding the Public Revenue System in Kenya: An Overview of the Tax System
    (AERC, 2025) Kiriga, Benson; Nato, Jacob; Remcho, Nathan; Eldrup, Magnus
    This paper provides a high-level analysis of Kenya’s tax system, examining structures, performance, and potential reforms to enhance domestic revenue mobilization for economic development. Synthesizing data from national agencies, we identify the central challenges facing the tax systems in Kenya including compliance levels, a significant informal sector, and economic shocks. Our analysis underscores the need for data-driven policymaking, emphasizing Kenya’s Medium-Term Revenue Strategy (MTRS) 2024-2027, aimed at reversing declining tax-to-Gross Domestic Product (GDP) ratios through a comprehensive modernization of the public revenue system. Our study further highlights major revenue streams such as income taxes and value added tax to show how a few taxes make up a large portion of domestic revenues and the urgency for optimization within these taxes. The stagnant or declining performance of many tax structures in Kenya reveal a need for comprehensive reviews and updates that enhance progressivity, encourage compliance, and raise revenues relative to GDP.