Monday, November 4, 2024 – The International Monetary Fund (IMF) has warned
President William Ruto’s government of the dire consequences of enacting
Environment Cabinet Secretary Aden Duale’s new tax proposal which Gen Z
rejected in June during street protests.
Duale is proposing an Environmental
Restoration Levy on all imported finished products.
However, according to the IMF,
the government should be mindful of introducing such levies and steer clear of
unintended consequences by conducting upfront an economic impact assessment
before considering enacting the tax levy into law.
The government has been advised
to do its due diligence assessment on exports, potential spillovers to trading
partners, inflation, and public finance.
The IMF has also warned about
the possibility of multiple taxation along the value chain. It has warned about
the tax rates and risk of overestimating associated yields by considering
demand elasticity and administrative and compliance costs, including the
feasibility of monitoring and enforcement.
It has also advised the
government to take a careful assessment and build consensus that is essential
to ensure that future environmental-related levies do not face social and
political pushback.
In the proposed Bill, Duale
revealed that all importers of the finished products would be required to pay
the fee directly to the National Environment Restoration Fund established by
Section 25 of the Environmental Management and Coordination Act.
At the same time, IMF advised
Ruto and the Kenya Kwanza government to address corruption to regain the
trust of Gen Z, who are skeptical about tax increases and their intended public
benefits.
The Kenyan DAILY POST
