The World Bank has urged Kenya to raise value-added tax (VAT) and excise duties to address a ballooning supplier arrears crisis, according to a Business Daily report.
The multilateral lender’s recommendation aims to clear pending bills, which surged to Sh526 billion in June from Sh421.6 billion in March, contributing to business closures, layoffs, and a rise in non-performing loans.
However, the proposal has sparked concerns about potential social unrest, as higher consumption taxes could further burden Kenya’s struggling citizens.
Lawyer Willis Otieno sharply criticized the World Bank’s stance in a statement on X, arguing that Kenya should prioritize debt restructuring and fiscal discipline over taxing essentials.
“Kenya needs to pivot from tax expansion on essentials to debt restructuring, public expenditure discipline, and broadening the tax base through economic growth, not taxation of the poor,” Otieno said.
He accused institutions like the World Bank of prioritizing creditors’ interests over citizens’ welfare, emphasizing that VAT’s ease of collection does not equate to fairness.
Otieno advocated for a progressive tax system targeting wealth rather than survival, warning that additional consumption taxes could exacerbate inequality.
Kenya’s economy, already grappling with high living costs and unemployment, faces heightened risks if the government adopts the World Bank’s recommendations.
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