In Kenya, government officials have gone forward with their plans to increase the taxation of a number of commodities. The now-higher tariffs for gambling tax on winnings, which were included in this recent change, have received the support of the International Monetary Fund (IMF). This latest update in the taxation of essential commodities also includes fees for bank loans and cooking oil.
The Kenyan government’s reasoning behind the new taxation fees is logical. They say that the increase in taxation revenue will assist in dampening the economic blow of increasing fertilizer and petroleum prices due to the ongoing war in Ukraine.
Boosting the Local Economy
The IMF’s most contemporary analyses of the Kenyan economy report that the changes in taxation policies have contributed to a healthier monthly tax turnover. The government’s decision to tax the Kenyan gambling industry harder has to do with the fact that the industry has grown immensely. This growth is spurred by the popularity of mobile money via M-Pesa, the largest mobile network operating in Kenya. M-Pesa is a money transfer service for smartphones and this business has put a lot of money into the Kenyan government treasury in tax.
Here is a breakdown of the new taxation levees:
- Gas for cooking now comes with a 16% levy.
- The excise duty on data and airtime has risen from 15% to 20%.
- Commissions and fees taken from loans will also now be taxed at 20%.
- All winnings from betting and gambling receive a 7.5% tax increase.
The IFP Mission Chief in charge of Kenyan operations, Mary Goodman, stated that Kenya’s fiscal position had been greatly improved by tax revenue.
There are currently Sh5.7 billion in fertilizer subsidies that have been allocated by the Treasury to assist small-scale farmers who need to continue into the primary season for planting crops. Something that has become essential following the loss of Russian supplies after international sanctions were imposed on the country. For the short-rainfall period between October and December, another Sh1.5 billion is now budgeted.
The Ukraine Impact
On the other side of the coin, Sh49.164 billion was released by the Treasury before the 14th of April under what is known as the “pump stabilization scheme”. This scheme began in April of last year to alleviate the costs of vital goods that have been on the rise since Russia went to war with Ukraine.
Mary Goodman of the IFP says that while there will be spillovers from the ongoing war in Ukraine it will only have a modest impact on the local economy.
Patrick Njoroge, Governor of the Central Bank of Kenya, stated that the ongoing war in Ukraine and the consequent sanctions on Russian trade will not deliver a significant blow to the economy of Kenya. His justification is the fact that both Russia and Ukraine imports are of low value to Kenya.
Mr. Njoroge states that Russian imports account for a measly 1.8% of the country’s Sh2.15 trillion import bill. Ukrainian imports account for even less at only 0.9%.