The World Bank has issued a stern warning to Kenya, drawing attention to the adverse effects of erratic tax adjustments on the nation’s economic stability. Kenya’s government, grappling with revenue shortfalls, aims to offset budget deficits through tax hikes. However, the World Bank’s latest Kenya Economic Update underscores the detrimental impact of unrealistic revenue forecasts and frequent tax alterations, citing their contribution to an unreliable business climate.

Expressing concern over the Kenyan government’s recurrent tax policy shifts, the World Bank highlights the potential long-term repercussions on economic stability. These fluctuations could dissuade foreign investors seeking predictability, essential for making informed investment decisions. The report underscores the necessity for a consistent tax framework, crucial for businesses to devise effective long-term strategies, emphasizing the disruptions faced by import/export companies navigating intricate international tax regulations.

The World Bank further elucidates how these unpredictable tax changes directly influence business cost structures, complicating tax compliance and potentially reducing government revenue. The warning coincides with Kenyan preparations for potential tax increases, as the government seeks remedies for the budget shortfall. Despite the Treasury’s commitment to fiscal consolidation, the World Bank stresses the imperative of realistic revenue projections to bolster budget credibility and avert unsustainable expenditure practices. In essence, fostering a stable tax environment is imperative for Kenya to attract foreign investment, ensure economic sustainability, and spur growth.