Economic expert Alex Kanyi has cautioned that Kenya’s rising tax burden is putting immense pressure on both employers and workers, warning that the growing cost of labour could force more companies to downsize or shut down.
Speaking during an interview on Radio Generation on October 13, 2025, Kanyi said the country is witnessing a gradual but deliberate shift towards indirect taxation, with levies such as Value Added Tax (VAT) and excise duties becoming major revenue sources for government.
He pointed out that VAT on fuel, for instance, has doubled from 8 percent to 16 percent over recent years — a clear sign of the state’s increasing reliance on indirect taxes.
“It tells you there is a slow but steady shift toward taxes like VAT and excise duties,” Kanyi said. “And this is not unique to Kenya. Across Africa, we see countries like Ghana, Morocco, and Zimbabwe raising VAT rates in a bid to collect more revenue.”
Kanyi noted that even South Africa had attempted a modest 1 percent VAT increase, reflecting a broader regional trend as governments struggle to boost revenue without overburdening direct taxpayers.
However, he warned that the ripple effects of rising taxes are being felt across the economy. Many employers, he said, can no longer sustain large workforces because of multiple statutory deductions such as PAYE, the housing levy, and other charges tied to employee costs.
“As taxes increase, companies are forced to re-evaluate their payrolls, and that’s why we are seeing more closures or downsizing,” he explained.
Kanyi further expressed concern that higher taxes are eroding household purchasing power. “When people have less disposable income, they spend less, and even sectors dependent on consumption, like those affected by excise duty, suffer,” he added.
VAT is an indirect tax on taxable goods and services supplied in or imported into Kenya, ultimately paid by consumers but collected by registered businesses.
Excise duty on the other hand is a tax levied on the local manufacture, importation, or local supply of specific goods and services.