The National Treasury has announced a new medium-term revenue strategy designed to bolster domestic revenue mobilization while significantly lowering key tax rates.
This strategic shift, unveiled by CS Mbadi, emphasizes not increasing taxes but rather reducing them to enhance tax compliance and broaden the tax base.Key aspects of the strategy include:-
*Reduction in VAT: The Value Added Tax (VAT) will decrease from 16% to approximately 14%.
Lower Corporate Tax Rates: Corporate tax will be reduced from 30% to 25%.-
Decreased PAYE Rates: Pay-As-You-Earn (PAYE) rates will also be adjusted to ease the tax burden on individuals.
“This approach is part of our broader strategy to strengthen the policy framework for fiscal consolidation,” Mbadi stated.
The ultimate aim is to meet the East African Community convergence criteria, targeting a fiscal deficit of 3% of GDP.
In addition to tax reductions, the Treasury is calling for enhanced reforms in Public Finance Management (PFM).
Accounting officers are urged to focus on efficiency, accountability, and prudent resource use.
A pivotal component of this strategy is the implementation of a new end-to-end e-government procurement system.
This system is intended to increase transparency and ensure value for money in government spending.
The initiative will require Sh560 million, with CS Mbadi directing the Principal Secretary for the Treasury to allocate the necessary funds.
“The savings from disciplined procurement will significantly surpass the initial investment,” Mbadi assured.
The new procurement system is projected to be fully operational by January 2025, with pilot programs currently underway.
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