Over 1,000 Chief Executive Officers (CEOs) have urged President William Ruto’s administration to avoid abrupt changes in Kenya’s tax structure, warning that unpredictable tax policies could hinder economic growth and discourage investment.
The concerns were highlighted in the CEO’s Survey, conducted by the Central Bank of Kenya (CBK) and released on Tuesday, February 11, 2025. The report captures the sentiments of business leaders who want the government to create certainty around taxation to ensure stability in the business environment.
Concerns Over Tax Uncertainty
The CEOs, drawn from major private sector organizations including:
- Kenya Association of Manufacturers (KAM)
- Kenya National Chamber of Commerce and Industry (KNCCI)
- Kenya Private Sector Alliance (KEPSA)
expressed concerns that frequent tax changes and unpredictable policies dampen investor confidence, disrupt financial planning, and impact long-term economic growth.
Challenges Cited by Business Leaders
The CEOs outlined three key challenges caused by abrupt tax changes:
- Increased Business Uncertainty:
- Unpredictable tax policies make long-term planning difficult, discouraging local and foreign investment.
- Higher Cost of Doing Business:
- Sudden tax changes increase operational costs, affecting profitability and expansion plans.
- Reduced Access to Credit:
- Businesses are struggling to access loans due to high-interest rates and uncertainty in taxation policies.
Economic Outlook for 2025
Despite these concerns, the CEOs expressed optimism about Kenya’s economic recovery, projecting strong growth in 2025 driven by:
- Favorable weather conditions (expected boost in agriculture)
- Macroeconomic stability (stable shilling, declining interest rates, and low inflation)
- Improved business environment (if government policies remain predictable)
However, they emphasized that unpredictable tax changes threaten this positive outlook.
Recent Abrupt Tax Changes Under Ruto’s Administration
Since taking office in 2022, President Ruto’s government has implemented several major tax and statutory deductions, many of which were introduced abruptly, including:
- Affordable Housing Levy
- 1.5% deduction from employees’ gross salary (plus a 1.5% employer match) following a High Court ruling upholding the Affordable Housing Act.
- Social Health Authority (SHA) Contributions
- 2.75% deduction from gross salary for mandatory health insurance.
- Self-employed individuals required to contribute Ksh300 per month.
- National Social Security Fund (NSSF) Changes
- Employee contributions increased to Ksh4,320, up from Ksh2,160.
These policies have faced significant backlash, with many Kenyans arguing they increase the cost of living.
CEOs Call for Business-Friendly Policies
In addition to stability in tax policies, business leaders are also pushing for:
- More government support for businesses
- Policies that promote affordable lending
- Lower taxation on key industries to spur economic growth
The CEOs warned that businesses continue to struggle with limited access to credit, despite CBK’s efforts to lower interest rates.
Final Thoughts
Kenyan business leaders have made it clear: stability in taxation is critical for economic growth. They have urged the government to consult stakeholders before making tax changes and to avoid abrupt policy shifts that disrupt business operations.
As Kenya aims for economic recovery in 2025, the government’s response to these concerns could determine whether businesses thrive or struggle under increased financial pressure.
