Tax Reforms in Kenya: Reforming Value Added Tax

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Browsing Tax Reforms in Kenya: Reforming Value Added Tax by Author "Remcho, Nathan"

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    Reforming Excise Taxation on Alcohol Products in Kenya
    (AERC, 2025) Oguso, Alex; Ochieng', James; Remcho, Nathan; Eldrup, Magnus; Chemnyongoi, Hellen
    This paper explores the excise taxation systems for alcohol products in Kenya, focusing on optimizing tax policy to enhance revenue generation and further mitigate negative externalities. Utilizing a proprietary elasticity estimation nuanced by a literature review to generate joint Laffer curves, we identify potential adjustments that could increase government revenue without causing significant market disruptions. Our findings suggest that there is a scope to raise taxes on alcohol products, which could not only boost fiscal income but also improve public health outcomes by discouraging excessive consumption. The paper proposes practical mechanisms that include a move to alcohol content-based excise system for taxation of alcoholic products in Kenya. The recommendations in the paper highlight the potential for excise taxes to contribute to economic growth and public welfare in Kenya while emphasizing the importance of stakeholder engagement and data-driven policy making.
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    Reforming Excise Taxation on Tobacco Products in Kenya
    (AERC, 2025) Oguso, Alex; Ochieng’, James; Remcho, Nathan; Eldrup, Magnus; Chemnyongo, Hellen
    This paper explores the excise taxation systems for tobacco products in Kenya, focusing on reform of the tobacco taxation system to achieve equity in taxation by changing the tax structure to be based on optimal tax rates and reviewing the considerations for filter and non-filter cigarettes. Utilizing a proprietary elasticity estimation nuanced by a literature review to generate joint Laffer curves, we identify potential adjustments that could increase government revenue without causing significant market disruptions. From the comprehensive review of the excise tax system on tobacco products, there are strong arguments in favor of equal treatment of cigarette brands and a uniform tax structure for filter and non-filter cigarettes. The empirical analysis suggests that there is a scope to raise taxes on tobacco, which could not only boost fiscal income but also improve public health outcomes by discouraging excessive consumption. However, it is worth considering that the policy considerations and the resulting revenue projections will change depending on the enforcement policies accompanying them. Therefore, it is important for the government to strengthen enforcement measures to curb illicit tobacco trade and protect the legal market.
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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.