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Tax hikes meant to save Kenyan economy are 'sending businesses broke'

Kenya is grappling with a five-year streak of business closures linked to high taxes that critics blame on a government "borrowing spree" that most recently saw Nairobi awarded a $941 million loan from the International Monetary Fund.

Some 2,000 companies were struck off over the last financial year due to high operating costs and uncompetitive taxes, data from the Business Registration Service (BRS) shows. Others were forced to downsize in order to stay afloat.

In an effort to replenish the coffers of Kenya's cash-strapped economy, President William Ruto last year revamped tax rules while at the same time introducing new levies.

Ruto was elected on the promise that he would reduce borrowing – and his overhaul of the tax system has been deeply unpopular among families and businesses struggling with the rising cost of basic goods.

Feeling the pinch

In the rural town of Githunguri, in Kenya's central Kiambu County, former alcohol distributor Peter Mwaura moved into pig farming – saying excessive licencing fees, taxes and bribes had made his business unsustainable.

"I was working to pay taxes. Even with the little profit I got, some [police] officers wanted bribes so that I could operate beyond the stipulated time," Mwaura told RFI.

"I decided to close the business and try pig farming. Even though the prices for feeds is high, it is generally better than the drinks business."

In the capital Nairobi, meanwhile, electronics businesses are struggling to stay afloat amid the reduced demand and increased cost of goods.


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