By
Lurit Yugusuk
Following the debt binge over the last couple of years, Kenya is set to spend KSh. 1.36 trillion towards debt repayment annually starting FY2022/23 going forward[1]. In light of this, debt repayments will consume approximately 65% of taxes. This signals that the country has a narrower fiscal space for balancing the budget and achieving equitable and sustainable economic development.
Nonetheless, it is notable that the Kenya government gives away or foregoes a lot of revenues that appears not to square out with its fiscal challenges. For instance, a 2021 Tax Expenditure Report published by the National Treasury highlights that Kenya has foregone on average Ksh383.9 billion worth of revenues between 2017 and 2020 to tax incentives. These revenue losses compare to equitable share revenues allocated to all counties in FY2020/21[2]. Also, the report estimates that the country loses up to 6% of GDP through generous tax incentives. A 2017 publication by the IMF set the cost of tax incentives at KES 478 billion, a figure that accounts for 5.3% of the country’s GDP.
What then does this mean for fiscal justice in Kenya? At what cost is the government dishing out tax incentives for individuals and corporates established in Kenya? Is there room for better management and administration incentives/expenditures to ensure the economy reaps the most? Are tax expenditures as efficient as argued by the government?