National Tax Policy 2023

Abstract

The National Tax Policy (herein referred to as the Policy) sets out broad parameters on tax policy and other tax related matters. It articulates broad guidelines for governing tax administration and the tax system in Kenya. More specifically, it provides a set of policy guidelines for taxation of income, goods and services and forms the·basis for review of tax legislation, development, and administration. Its a vital tool for revenue mobilization to facilitate implementation of the Government's priority programmes under the BETA. The Policy is developed against a background of tight fiscal space occasioned by emerging expenditure pressures from drought related expenditures and external shocks. At the same time, the tax system faces numerous challenges leading to under performance in revenue collection. Kenya's revenue yield falls below the desired EAC target of 25 percent of GDP required under the EAC Monetary Union Convergency Criteria despite the heavy investments by the Government to transform the ta~ system. Ordinary revenue as a percentage of GDP has generally been d!2clining over the years from a high of 18.1 percent of the GDP in the FY-2013/14 to 15.1 percent of the GDP in the FY 2021/22. These challenges highlight the underlying policy issues affecting the tax system_