History of Taxes in Kenya

The history of taxes in Kenya dates back to the pre-colonial period when people paid tithes to trade in different territories of a tribe. At the time, the Portuguese and Arabs were the primary traders. The taxation system then mimicked the Islamic law as well as the trade rules. The locals had to pay Sadaqa, jizya, and zakat which are part of the Islamic law. Other than that, traders paid customs levy, harbor fees and capitation tax (tax per individual).

Goods such as cloves, beads, and ivory brought from sultanate were eligible for customs duty. The taxpayers fell into two categories (tax base). Muslim followers paid voluntary taxes or amounts they were willing to give. READ ALSO: Superstar Chameleon flaunts off new Bentley worth a cool KSh 24 million When the British took over the East African Protectorate (Kenya included), they inherited some of the taxation systems of the Arabs and Portuguese and introduced new rates.

The capitation tax remained but controlled by British as it was while Portuguese and Arabs shared customs revenues. Some of the new taxes introduced by the British were Hut and Poll Tax: A fee payable by all locals per hut through labor, money, and grain or stock. Land Tax Graduated Personal Tax Income Tax By the time Kenya gained its freedom, the taxes had included trade, income, and excise duty. During the ten years of independence, the government concentrated on its taxation policy. By 1973, the Kenyan government introduced a sales tax. But as the economy faced challenges related to the oil crisis there was a need for fiscal reforms. In the same year, the state launched a 20% withholding tax on nonresident and 10% rate on goods that were duty-free. After the collapse of EAC in 1977, the Kenyan government raised the sales tax to 15%, excise duty to 59% from 50% and decreased income tax by 7% to 29%.

By 2000, the government intended to collect taxes equivalent to 24% of the GDP. So they focused more on the consumption aspect (sales tax). As a result, a progressive income tax became functional with the low-income earners paying 10% while the high-income earners paid 65%. The income tax for local companies went up to 45% while that for foreign companies rose to 52%. Since then, the parliament has amended some of the taxes as well as the rates. VAT replaced the sales tax while income tax, excise duty, and customs rates changed.

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