NAIROBI, April 16 (Xinhua) -- Kenya should expand its tax base in order to remain above the International Monetary Fund (IMF) revenue threshold of at least 15 percent tax to gross domestic product (GDP) ratio, analysts said on Tuesday.
Judd Murigi, head of research at ICEA LION Asset Management, said Kenya's revenue-to-GDP ratio fell to 17 percent in 2018, after remaining relatively constant at 18-19 percent between the fiscal years 2014 and 2018.
"The revenue collection rate can still be improved, as has been seen in other developing countries that have significantly enhanced their tax collection by ensuring the war on corruption is won, broadening the tax base via simplifying the tax system, lowering rates and reducing unnecessary exemptions," Murigi said during the release of the April 2019 Investor Pulse Report.
Murigi noted that the bulk of the Kenya's labor force is in the informal sector and as a result don't pay income tax.
The non-formal sector could be incentivized to pay taxes if they are subjected to lower taxation rates, he said.
Murigi called on the government to further leverage the use of technology to capture more workers under the tax bracket.
Kenya needs to reform its fiscal policies to ensure that development expenditure is prioritized as opposed to recurrent expenditure, he said.
Development expenditure ub 2018 will be at its lowest absolute level since 2013, Murigi noted.
