Nairobi, Kenya – The discussion surrounding the implementation of a wealth tax in Kenya has intensified, with proponents arguing it could significantly boost government revenue and address the nation's pronounced wealth inequality. This comes as the Kenyan government navigates a challenging fiscal landscape, aiming to reduce its budget deficit and manage public debt.

The National Taxpayers Association (NTA), a prominent lobby group, has put forth a detailed proposal for a 'net worth tax' on Kenya's wealthiest individuals, projecting it could generate over KSh 100 billion annually. This proposal suggests a tiered system: a 1.5% annual levy on wealth between $1 million and $3 million, a 3% tax for assets between $3 million and $100 million, and a 5% charge for wealth exceeding $100 million. The NTA contends that Kenya's current tax framework is regressive and insufficient in tackling wealth and income inequality.

Historical and Political Context

The concept of a wealth tax is not new to Kenya. In 2018, the Treasury sponsored an Income Tax Bill that sought to impose a higher maximum tax rate of 35% on incomes exceeding KSh 9 million per annum, or KSh 750,000 per month. However, this bid was stalled due to public opposition. More recently, President William Ruto has indicated a shift in taxation strategy, stating, "We are over-taxing trade and under-taxing wealth," suggesting a move towards taxing wealth rather than just income and consumption.

Kenya is ranked among the top 10 most unequal countries globally and the most unequal in East Africa. Data from the World Bank indicates Kenya's Gini index of wealth inequality fell from 0.81 in 2005 to 0.74 in 2015, while its Gini coefficient of after-tax income inequality fell from 0.47 to 0.41 over the same period. However, other reports show varying figures, with the World Bank stating a Gini Index of 36.2% in 2020 and 38.7% in 2021, indicating an increase in inequality. Nairobi County, despite having lower wealth inequality in some surveys, has also been identified with a high Gini index in others, highlighting the complexity of measuring and addressing this issue.

Laws, Policy, and Governance

The Kenyan government's fiscal policy for the Financial Year (FY) 2025/2026 aims to reduce the fiscal deficit from 5.7% of GDP in FY 2024/2025 to 4.8% of GDP in FY 2025/2026. Total expenditure is projected at KSh 4.2919 trillion for FY 2025/2026, with recurrent expenditures amounting to KSh 3.1344 trillion. The projected total revenue collection, including grants, is KSh 3,321.8 billion. The fiscal deficit of KSh 923.2 billion for FY 2025/2026 will be financed by net external borrowing of KSh 287.7 billion and net domestic borrowing of KSh 635.5 billion.

In efforts to stimulate investment, Kenya has recently adjusted its corporate tax structure. The Finance Act 2025, signed on June 26, 2025, reduced corporate income tax rates for startups to 15% for the first three years and 20% for the subsequent four years, down from the previous standard rate of 30%. Large corporations establishing operations under the Nairobi International Financial Centre (NIFC) framework and investing at least $23.2 million within three years can also benefit from a reduced corporate income tax rate of 15% for 10 years. Additionally, companies in Export Processing Zones (EPZs) enjoy a 0% corporate tax rate for ten years.

Stakeholders and Testimonies

Lawyer and political analyst Willis Otieno has publicly urged the government to adopt a progressive tax system that targets wealth rather than poverty, arguing that the current system disproportionately burdens low-income Kenyans. His sentiments resonate with a broader public debate on social media, where Kenyans have questioned whether current financial policies exacerbate the cost-of-living crisis.

The NTA emphasizes that a wealth tax could diversify revenue sources, reduce reliance on regressive consumption taxes, and foster greater trust in government institutions by ensuring the wealthy contribute their fair share. They also suggest reframing the wealth tax as a 'solidarity tax' to align with Kenya's cultural values and national ethos of collective responsibility.

Evidence and Data

Kenya's Gini index, a measure of income inequality, was 38.9% in 2021, an increase from 35.8% in 2020, according to Stats Kenya. Inequality was higher in urban areas (37.3%) than rural areas (29.1%), with Nairobi County recording the highest inequality at 40.9%. In contrast, the Kenya Demographic and Health Survey (KDHS) in 2022 reported a Gini coefficient of 28% for wealth inequality, with higher inequality in rural areas (24%) compared to urban areas (10%).

The government is also implementing social welfare programs. President William Ruto announced on Friday, September 19, 2025, that the government will cover Social Health Authority (SHA) contributions for over 2.2 million vulnerable Kenyans, ensuring universal health coverage. Salaried employees contribute 2.75% of their gross salary to SHA, with a minimum of KSh 300 per month. The National Social Security Fund (NSSF) has also seen increased savings, doubling to KSh 640 billion in two years after contributions were enhanced in 2023.

Risks and Implications

Implementing a wealth tax presents challenges, including defining and valuing complex assets like artwork or intellectual property. There is also a risk of capital flight and tax avoidance, with wealthy individuals potentially moving assets offshore. The Kenya Revenue Authority (KRA) would require strengthened technical and administrative capacity to effectively implement such a tax.

Unknowns and Controversies

While the NTA's proposal offers a clear framework, the specific details of any potential government-led wealth tax, including thresholds and rates, remain unknown. The political will to overcome potential opposition from business groups and some political leaders, as seen in past attempts and in other countries, will be crucial.

Timeline and Next Steps

The debate around a wealth tax is ongoing, with the NTA actively lobbying for its adoption. The government's focus on fiscal consolidation and revenue mobilization, as outlined in the FY 2025/2026 budget, suggests that new tax measures are under consideration.

What to Watch

Observers will be closely watching for any legislative proposals from the National Treasury regarding a wealth tax in the coming months. The public discourse, particularly from civil society organizations and economic experts, will also play a significant role in shaping policy. The government's commitment to reducing inequality while ensuring economic growth will be a key factor in how this debate unfolds.