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Kenya could net Sh40b through tax reforms

NAIROBI, Kenya, Mar 17- Kenya Revenue Authority (KRA) has the potential to net an extra Sh40 billion in taxes if it further streamlined Value Added Tax mobilisation and reduced tax exemptions on imports.

International Monetary Fund (IMF) Resident Representative in Kenya Ragnar Gudmundson said the Kenyan tax man could accrue significant gains by broadening the tax bracket.   

“Substantial revenues can be realised from the real estate and the informal sector. Broadening the income and corporate tax brackets could significantly improve Kenya’s tax collection,” he added.

IMF he said was working closely with the Kenyan government on the new VAT law and on the creation of the new Tax Reform Commission to streamline tax collection and administration.

Mr Gudmundsson was speaking during a pre-event briefing on the oncoming conference on Revenue Mobilisation in sub-Saharan African slated for March 21 2011 in Nairobi.

The conference is jointly organised by the government and will explore ways of increasing tax collection in the sub-Saharan region.

According to IMF World Economic Outlook 2009 data, tax revenues among countries within the region in relation to their Gross Domestic Product are still low when compared to the global standards.

Mr Gudmundsson noted that some of these countries lose almost half of their tax revenue through tax evasion and that sub-Saharan states need to adjust their tax policies to match international standards. 

Nonetheless, revenue mobilisation in sub-Saharan countries has increased in the last 15 years after a declining trend in tax revenues during the 1980s and early 1990s.

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The tax to GDP ratio on average in the region increased from around 11.5 percent in the 1995 to 15 percent in 2009. 

The conference, Mr Gudmumdsson said, was to cement the long history of the continuous technical assistance in tax policy and revenue administration provided by IMF over the years.

The event is billed to offer an opportunity for African policy makers to “exchange notes” on successes and challenges on revenue mobilisation. 

“The experiences of African tax officials will also inform an ongoing G 20 initiative that supports revenue mobilization efforts in developing countries,” he pointed out.

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