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TAX ON GROSS INCOME

“Kenyans are overtaxed, repressed, exploited and abused. They don’t receive even 1% worth of value from their taxes!” — Miguna Miguna,

Tax Burden Explosion: 14 New Taxes

When William Ruto campaigned for the presidency, he positioned himself as the champion of ordinary Kenyans—the “hustlers” struggling to make ends meet. He promised to reduce the cost of living and create an enabling environment for small businesses to thrive. Instead, his administration has implemented the most aggressive taxation regime in Kenya’s history, crushing businesses and pushing millions deeper into poverty.

The Finance Act 2023 Catastrophe

The Finance Act 2023 stands as the most controversial tax legislation in Kenya’s history:

Introduced 14 new tax measures in a single bill.

Sparked nationwide protests resulting in 39 deaths (according to the Kenya Human Rights Commission).

Required military deployment to quell public outrage.

Among its most punitive provisions:

Housing Levy: A mandatory 1.5% deduction from all formal sector workers’ salaries.

Doubled VAT on bread and cooking oil (from 8% to 16%).

16% VAT on previously zero-rated petroleum products.

Digital asset tax of 3% on all online transactions.

Motor vehicle tax increases of up to 35%.

The Parliamentary Budget Office estimated that these measures would extract an additional Ksh 211 billion from an already struggling population, with the heaviest burden falling on low and middle-income earners.

The Housing Levy Deception

Perhaps the most contentious tax has been the Housing Levy:

Marketed as: “Affordable housing for all Kenyans”

Reality: A forced savings scheme with no clear allocation mechanism

Over Ksh 80 billion (as of March 2024)

Houses built: Fewer than 5,000 units completed

Beneficiaries: Primarily politically connected individuals

Court challenges to the levy have been met with legislative maneuvers to circumvent judicial rulings. When the High Court declared the levy unconstitutional in November 2023, Ruto’s administration simply reintroduced it through a separate bill, ignoring the court’s determination.

The Digital Tax Assault

Ruto’s government has aggressively targeted Kenya’s vibrant digital economy:

Digital Service Tax: Increased from 1.5% to 3%

Mobile Money Transfer Tax: Raised from 10% to 15%

Internet Data Tax: New 15% excise duty on internet packages

These measures have directly contradicted Ruto’s campaign promises to support youth entrepreneurship in the digital space. The Kenya Association of Digital Entrepreneurs reported that over 27,000 online businesses closed within six months of these taxes taking effect.

The Small Business Extinction

The impact on small businesses has been devastating:

New turnover tax: 3% on all businesses with revenue under Ksh 5 million

Presumptive tax: Fixed amounts regardless of profitability

Import declaration fee: Increased from 2.5% to 3.5%

The Kenya National Chamber of Commerce and Industry reported in February 2024 that approximately 42% of small businesses had either closed or significantly downsized since Ruto took office, with excessive taxation cited as the primary cause.

The Fuel Price Crisis

Despite global oil prices decreasing, Kenyans are paying record prices for fuel due to taxation:

Fuel taxes and levies: Now constitute 48% of the pump price

New taxes added: Road Maintenance Levy increased by Ksh 5 per liter

Anti-adulteration levy: Doubled from Ksh 18 to Ksh 36 per liter

VAT on fuel: Increased from 8% to 16%

The ripple effect has been catastrophic across all sectors, with transportation costs increasing by 43% and food inflation reaching 15.3% by March 2024, according to the Kenya National Bureau of Statistics.

The Double Taxation Nightmare

Many of Ruto’s tax measures amount to double taxation:

Taxing already taxed income (Housing Levy on net salary)

Imposing VAT on products whose inputs have already been taxed

Charging excise duty on services that already attract VAT

The Tax Justice Network Africa has described Kenya’s current tax regime as “predatory and regressive,” noting that it disproportionately targets those least able to pay while providing generous exemptions to politically connected corporations and individuals.

The Revenue Without Services Paradox

Despite record tax collection, public services have deteriorated:

Kenya Revenue Authority collections: Increased by 22% (FY 2022/23)

Healthcare budget: Reduced by 17%

Education allocation: Decreased by 9%

Road maintenance funding: Cut by 23% despite increased road levies

This disconnect between increased taxation and decreased services has fueled public perception that tax revenues are being misappropriated or diverted to debt servicing rather than public benefit.

The International Comparison

Kenya’s tax burden under Ruto has become one of the highest in Africa:

Tax-to-GDP ratio: Increased to 17.8% (compared to African average of 14.2%)

Number of different taxes: 42 distinct taxes (compared to Tanzania’s 27 and Rwanda’s 22)

Compliance costs: Kenyan businesses spend an average of 180 hours annually on tax compliance (East African average: 104 hours)

The World Bank’s Ease of Doing Business indicators show Kenya has dropped 17 places since 2022, with the tax burden cited as a primary factor.

The Constitutional Questions

Many of Ruto’s tax measures have faced constitutional challenges:

Lack of public participation in tax legislation

Violation of principles of equity and fairness

Implementation of taxes struck down by courts

Bypassing parliamentary oversight through executive orders

The Law Society of Kenya has filed 11 separate constitutional petitions challenging various aspects of Ruto’s taxation regime, with several cases still pending before the courts.

Sources:

This article draws from multiple sources including: Kenya Revenue Authority Tax Collection Reports (2022-2024); Parliamentary Budget Office Analysis of the Finance Act 2023; Kenya National Bureau of Statistics Economic Surveys and Inflation Reports; World Bank Kenya Economic Update (December 2023); Kenya Association of Manufacturers Economic Impact Assessment (January 2024); Kenya National Chamber of Commerce and Industry Business Survey (February 2024); Tax Justice Network Africa’s Kenya Taxation Report; Kenya Human Rights Commission documentation of Finance Act protests; Court judgments on tax-related constitutional petitions; and public statements by the Cabinet Secretary for Treasury between September 2022 and April 2024. Additional data was sourced from the Institute of Economic Affairs Kenya and the Kenya Institute for Public Policy Research and Analysis (KIPPRA) economic reviews.