Kenya has been an economic success story in Africa. However, current tax regime is heavily reliant on income and consumption taxes and disproportionately impact low- and middle-income earners. Hence, there are calls for a progressive wealth tax that would shift part of the fiscal burden to the wealthiest households. Proposed models include tiered rates on net assets exceeding defined thresholds, covering real estate, financial assets, and business holdings.
It is said that wealth taxation in Kenya holds strong potential as a tool for enhancing revenue mobilization, reducing inequality, and promoting a fairer tax system. With an estimated fiscal gap of KES 1.6 trillion annually by 2030, a well-designed wealth tax targeting high-net-worth individuals could generate up to KES 100 billion per year, thus offering a sustainable source of funding for essential public services and development priorities.
However, successful implementation requires overcoming key challenges, including asset valuation, enforcement and administrative capacity. Strengthening legal frameworks, improving asset registries, and ensuring transparency in revenue use are critical. If carefully executed, wealth taxation can become a transformative instrument for equitable growth and fiscal sustainability in Kenya.
Our view: No, in our opinion it will not be the transformative instrument since it will simply not work. Why? The facts and expert opinion suggest that wealth tax is often economically inefficient and difficult to administer. In today’s global world where wealthy people are highly mobile and rather prefer to promptly relocate, instead of sitting idle and waiting for a taxman to come to collect the wealth tax, it will cause the reduced investment, thus the limited revenue and lower economic growth, plus the high administrative costs will be just an icing on the cake. Therefore, OECD recommends reforming existing taxes over introducing new wealth taxes. For the above reasons, we do not think the wealth tax is a good idea to move forward in Kenya or anywhere else. However, let’s wait and see.
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