State now targets professionals, landlords to increase tax revenue

The National Treasury is planning to introduce new taxes aimed at professionals engaged in private practice and landlords.

As revealed by National Treasury Cabinet Secretary John Mbadi on Wednesday, he noted that these sectors have not been contributing their fair share of taxes, placing a heavier tax burden on the majority of Kenyans.

To address this issue, the Treasury, in collaboration with the Kenya Revenue Authority (KRA), is set to implement reforms designed to enhance tax collection in these areas.

The CS pointed out that the withdrawal of the Finance Bill 2024 and the nullification of the Finance Act 2023 have heightened the need for expanding revenue collection strategies.

"The realities of the economic status the country finds itself necessarily require that to ease the tax burden on Kenyans, it is imperative that the government broadens the tax base," Mbadi said.

The CS further elaborated on the under-taxation issue, highlighting that sectors like VAT, rental income, and personal income tax are currently not being adequately targeted.

For instance, rental income has only yielded Sh17 billion in government revenue, far below the projected Sh100 billion.

Mbadi emphasised the wide range of professionals in Kenya. such as doctors, lawyers, accountants, and engineers many of whom are not fulfilling their tax obligations as required.

Digital tax system

As part of the tax reforms, the Treasury plans to introduce a comprehensive digital tax system.

This system aims to improve transparency and efficiency in tax collection and enhance fiscal management in line with Kenya's medium-term economic goals.

In discussions with President William Ruto, CS Mbadi confirmed plans to reform the KRA to create a more effective and economical tax collection system.

"I don't want us to militarise tax collection. We must do it in a way that people understand that paying taxes is a responsibility," he noted.

The CS stressed the government's role as the largest purchaser of goods and services, urging that if taxpayer money is used wisely, it will ultimately benefit the citizens.

Additionally, the Treasury announced plans to alleviate pressure on businesses by lowering taxes, including VAT and corporate tax rates.

"We (government) must lower the tax rates. We must lower the VAT rate. We must also try to reduce the corporation tax from 30 per cent to 25 per cent," Mbadi added.

Personal income taxes, primarily collected through the Pay-As-You-Earn (PAYE) system, are also a focus for the KRA.

In 2023, the KRA collected Sh543.2 billion from PAYE, reflecting a 9.7 per cent increase compared to previous years.