NAIROBI, Kenya- Kenya could unlock a significant revenue stream by taxing its wealthiest citizens, potentially raising Sh100.75 billion) annually.
According to a new report by the National Taxpayers Association (NTA), this move would represent nearly one-third of the funds sought in the rejected Finance Bill 2024.
The proposal outlines a phased wealth tax system targeting the country’s estimated 7,800 high-net-worth individuals (HNWIs), as highlighted in the latest Africa Wealth Report.
Breaking Down the Proposed Wealth Tax
The NTA report, Taxing Wealth in Kenya, divides HNWIs into three tiers based on their net worth and outlines corresponding tax rates:
- $1–$3 Million Net Worth:
Individuals within this range (5,700 people) would face an annual 1.5% wealth tax. This could yield $171 million (Sh22 billion) for the government. - $3–$100 Million Net Worth:
A 3% wealth tax for this group could bring in $450 million (Sh58 billion), addressing concerns that Kenya’s poor are disproportionately taxed. - Over $100 Million Net Worth:
The wealthiest 16 individuals would pay 5% annually, contributing $160 million (Sh20.6 billion) to public coffers.
NTA emphasizes that a fair and transparent tax regime targeting HNWIs could reduce income inequality while sparing average Kenyans who already bear a heavy tax burden.
The lobby group recommends a gradual rollout of the wealth tax, starting with enhanced data collection and robust valuation mechanisms.
By tapping into frameworks for property and financial asset taxation, Kenya can align its wealth tax policies with global best practices.
Countries like Argentina, Burundi, Colombia, and Uruguay have adopted wealth taxation, showcasing its viability even in developing economies.
NTA believes Kenya can draw lessons from these nations to create a progressive tax system that aligns with Article 201 of its 2010 Constitution, emphasizing fairness and equity in public finance.
The report also highlights the role of the Capital Gains Tax (CGT), describing it as a bridge between income and wealth taxation. CGT, which taxes the appreciation of assets over time, could play a pivotal role in capturing unearned wealth gains, further enhancing the effectiveness of a comprehensive wealth tax strategy.
“Designing a tax that exclusively targets HNWIs can help bridge the wealth gap and alleviate poverty without discouraging investment or overburdening middle-income households,” the report states.
By addressing the disparities in Kenya’s tax system, the government could also generate funds to improve social services and infrastructure, easing economic inequality.
