In Kenyan fiscal history, the year 2023 emerged as a watershed moment in the nation’s taxation regime. The stage was set by approving tax proposals within the chambers of Parliament, a decision that rumbled across the country, igniting fierce debates.

It was the era of President William Ruto’s government, and as the nation grappled with economic challenges, the Treasury devised a colossal Ksh3.6-trillion budget aimed at steering the ship through troubled financial waters.

To achieve this ambitious fiscal goal, the government implemented substantial changes that drew both applause and ire.

One of the most contentious measures was doubling Value Added Tax (VAT) on fuel, a move that promised to bolster the Treasury’s coffers by a substantial 17 percent.

The decision, however, sparked widespread dissent among Kenyans who decried the timing, citing the recent surge in the cost of living. The streets buzzed with discontent as taxpayers lamented the burden imposed upon their already strained wallets.

The tax reforms did not stop at fuel; they reached into the pockets of employees across the nation. A mandatory 1.5 percent housing levy was introduced, leaving workers with a smaller take-home pay.

Additionally, those in the highest income bracket faced a 5-percentage point increase in personal income tax, further fanning the flames of public discontent.

However, it was not only the general populace that voiced their grievances. Kenyan manufacturers, pillars of the nation’s economy, found themselves at odds with the government’s taxation policies.

A 10 percent levy on imported raw materials and intermediate goods, including critical components like clinker for cement production and packaging paper, drew vehement opposition.

Industry leaders argued that these levies would render their products non-competitive on the regional stage, putting them at a disadvantage against producers in other East African countries.

The halls of Parliament witnessed heated debates as opposition members fought tooth and nail against what they deemed controversial measures.

Yet, despite the dissenting voices, the tax proposals were ratified, leaving an indelible mark on the financial landscape of Kenya.

As the dust settled, the consequences of the taxation decisions became apparent. Kenyans grappled with the increased cost of living, businesses reeled under the weight of higher levies, and the nation stood at a crossroads, contemplating the long-term impact of the 2023 tax regime.

The court has so far stopped the 1.5 percent hosing levy effective January this year, but the government plans to reintroduce another Bill to parliament that addresses the concerns that the court raised.

gandae@businessdayafrica.org