Raising VAT to 18%: A Solution to Kenya’s Budget Deficit and Export Friction

• Treasury CS Njuguna Ndungu says government will cut spending after President Ruto rejected Finance Bill
• Kenya’s VAT is 16 percent, lower than Tanzania and Uganda’s 18 percent
• Increasing VAT to 18 percent would cut budget deficit, keep IMF happy, and reduce friction with Tanzania and Uganda
• Increasing VAT would generate at least Sh65 billion in extra revenue for KRA
• VAT is a regressive tax where rich and poor are taxed equally on consumption
• VAT is inflationary but plays a useful role in Kenya’s informal economy
• Kenya should set its VAT rate at 18 percent like Uganda and Tanzania

Source: the-star.co.ke

Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.

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