What next for Kenya’s tax regime after backlash?

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In the aftermath of deadly riots in Kenya over President William Ruto’s plans to increase taxes on essential goods, Abebe Aemro Selassie, head of Africa at the International Monetary Fund (IMF), made a speech in Rabat which was probably more timely than he had originally expected it to be.

In the speech, Selassie talks at length about how African countries can best finance their development goals, and points to three main sources of financing: internal revenues that governments can raise, access to market borrowing, and financial aid. “By far the most important of these sources of financing public sector activities in practice are domestic (mainly tax) revenues,” he argued.

“Internal resources and taxation [are] by far the most enduring sources for countries addressing their development financing needs,” Selassie added. “But increasing tax mobilisation is, to put it mildly, a difficult endeavour.”

That is certainly the inescapable lesson of the riots in Kenya, which were sparked in June when the government put forward a Finance Bill including significant tax hikes. Ruto initially aimed to introduce a 16% value-added tax on bread and a 25% duty on cooking oil, and also proposed a new annual tax on vehicle ownership