NAIROBI, Kenya, May 8 – The 2025 Finance Bill’s proposal to remove VAT exemptions for select sectors could hamper Kenya’s economic recovery and industrial growth, tax experts at Ernst & Young (EY) have warned.
The advisory firm says levying the standard 16 percent VAT on previously exempt tourism-related goods and manufacturing inputs could raise consumer prices, discourage investment, and stifle competitiveness in critical sectors.
Under the proposals, VAT exemptions would be scrapped for items such as tourist transport vehicles and materials used to build tourism infrastructure, as well as parts used in assembling locally manufactured vehicles.
EY’s Associate Director Stephen Ndegwa cautioned that while the move could yield short-term revenue gains, it risks long-term damage to sectors key to Kenya’s job creation, foreign earnings, and economic transformation goals.
