• July 24, 2023
  • Raf Peter
  • 0

Taxation is critical to any country’s economic growth and development because it provides governments with the revenue needed to finance public services, infrastructure, and social welfare programs. However, in Kenya, as in many other developing countries, tax inequities have become a major worry that impedes progress and exacerbates socioeconomic inequality. In this article, we attempts to bring light on some of Kenya’s prevalent tax injustices, which perpetuate an unequal distribution of income and impede the country’s overall growth and prosperity.

Tax Evasion and Avoidance.

Tax evasion and avoidance by individuals and corporations is one of Kenya’s biggest tax injustices. Tax evasion is the unlawful act of purposefully underreporting income or manipulating financial documents in order to lower tax burden. Tax avoidance, on the other side, is the exploitation of legal loopholes and complicated financial structures to minimize tax payments.

Large firms, especially multinational corporations, are skilled at exploiting these loopholes and relocating earnings to low-tax nations. This practice deprives Kenya of substantial tax income that could otherwise be invested in critical public services, infrastructure, and education, prolonging inequality and impeding the country’s progress.

Indirect Taxation Burden.

Due to a high reliance on indirect taxes such as Value Added Tax (VAT) and excise levies, the cost of taxation falls disproportionately on low and middle-income earners in Kenya. Indirect taxes devour a higher part of the poor’s income because they spend a larger portion of their wages on essential goods and services.

Due to a high reliance on indirect taxes such as Value Added Tax (VAT) and excise levies, the cost of taxation falls disproportionately on low and middle-income earners in Kenya. Indirect taxes devour a higher part of the poor’s income because they spend a larger portion of their wages on essential goods and services.

Lack of Progressivity in Income Tax.

Kenya’s income tax system suffers progressivity difficulties as well. A progressive tax system requires those with greater incomes to pay a higher percentage of their income in taxes. Unfortunately, Kenya’s income tax levels are not progressive enough, and the top income earners may not be paying their fair amount of taxes.

This regressive taxation structure expands the income disparity even more, putting the burden of financing government projects on the shoulders of the middle and lower classes.

Inadequate Property Tax Collection.

Kenya’s property tax system suffers several issues, with many properties undervalued or under assessed. Furthermore, tax authorities face challenges in identifying and taxing informal and untitled land and property.

As a result, wealthy property owners frequently avoid paying their fair share of property taxes, depriving the government of critical resources for infrastructure improvements and providing key services to the public.

What is the government doing to curb tax injustices?

Fortunately, the Kenyan government has acknowledged this problem and is on a mission to eliminate tax inequalities and create a more just and equitable tax system. Some of the measures that the government has put in place to attain this critical aim include:

Strengthening Tax Administration.

One of the most important parts of reducing tax inequities is improving tax administration and enforcement. Kenya’s government has been investing in updating tax collection methods in order to promote efficiency and transparency. This involves the implementation of online tax filing and payment platforms, the ability to track tax compliance in real time, and the reduction of opportunities for tax evasion.

Furthermore, the government is focused on capacity-building initiatives for tax officers in order to improve their abilities and knowledge in identifying and combating tax evasion schemes. This not only creates a more equitable tax system, but it also boosts public faith in tax officials.

Combatting Tax Evasion and Avoidance.

Tax evasion and avoidance are important contributors to Kenya’s tax injustices. To address this issue, the government has enacted harsher procedures and laws to combat these illegal actions. The government is sending a strong message to tax evaders and those who use legal loopholes to avoid paying taxes by cracking down on them.

Furthermore, the government is participating in international efforts to combat cross-border tax evasion and profit shifting. In an increasingly interconnected world, collaboration with other countries and adherence to global tax rules enhances the battle against tax inequities.

Progressive Taxation Policies.

Recognizing the necessity of progressive taxation, the Kenyan government has worked to develop and implement policies that require wealthier individuals and corporations to pay a higher proportion of their income in taxes. Progressive taxation aids in the redistribution of wealth, lowering income disparity and increasing social cohesion.

In this context, the government has proposed changing tax brackets, imposing higher tax rates on high-income individuals, and rewarding firms to invest in social and economic development by providing tax credits for responsible corporate behavior.

Enhancing Taxpayer Education.

Promoting taxpayer education and awareness is a critical component in reducing tax unfairness. Many people may engage in tax evasion unwittingly due to a lack of awareness of tax rules and their obligations. As a result, the Kenyan government has been aggressive in providing citizens and businesses with accessible and thorough information about their tax responsibilities.

Taxpayer education campaigns educate residents on the benefits of taxation and how their payments contribute to the country’s growth and development. It also gives them the authority to hold tax evaders accountable and promotes a culture of voluntary compliance.

Fighting Corruption and Improving Governance.

Corruption is a major barrier to a fair tax system. Tax evasion and misappropriation of tax revenues can flourish when tax officers or institutions are corrupt. Kenya’s government is attempting to enhance governance and combat corruption in tax administration and related agencies.

The government intends to develop a trustworthy tax system by increasing openness, accountability, and ethics. As a result, voluntary tax compliance increases and tax funds are allocated toward national development priorities.

Conclusion.

Addressing tax inequalities in Kenya necessitates a holistic approach involving both the government and citizens. Stricter enforcement of tax rules, closure of legal loopholes, and combating tax evasion and avoidance are critical measures toward increasing tax collections. Furthermore, establishing a more progressive tax structure that spreads the tax burden fairly among all income categories will aid in closing the wealth gap.

Combating tax inequities is a complicated task that necessitates ongoing efforts and coordination from the government, taxpayers, and other stakeholders. Kenya’s commitment to strengthening tax administration, tackling tax evasion, implementing progressive taxation policies, improving taxpayer education, and battling corruption paves the way for a fairer and more equal tax system. By attaining these objectives, Kenya will be able to realize the full potential of its tax revenues to drive long-term economic growth and increase the well-being of its inhabitants.

Leave a Reply

Your email address will not be published. Required fields are marked *

Open chat
Need help?
Frimor Safe Way Solutions
Hello👋
Can we help you?