A question that appears to generate surprisingly little debate in Kenya is the scope for legally mitigating taxes payable by individuals and corporate entities. Quite apart from the right of taxpayers to arrange their affairs so as to minimize taxes payable, tax planning is bound to gain increasing significance with the ever greater aggressiveness and sophistication of the Kenya Revenue Authority and other tax collecting bodies. The trend of increased aggressiveness and sophistication in tools and methods is occurring against a backdrop of a public policy of domestic sources being the primary sources of revenues for budgetary purposes. This results in governmental pressure on tax collecting agencies to improve their revenue collection performance. The result of this trend is the more stringent enforcement of taxation laws. Many individuals and corporate entities who in the past did not pay due taxes on any or all of their income are now having to do so or face severe consequences. The same scenario is playing out with regard to Customs and Excise duties as well as Value Added Tax. The introduction and implementation, despite spirited resistance, of Electronic Tax Registers for businesses is just one tool for effecting greater compliance with tax laws. With the imperative for massively greater public spending to achieve developmental goals, this overall trend of stringent tax law enforcement can be expected to continue (assuming of course continuity in the governmental policy referred to above).
With such seemingly inexorable trends, the question of tax mitigation by legitimate avoidance naturally occurs. How can Kenyan individuals and businesses arrange their affairs within the current legal environment so as so minimize their tax burden? The past and present practice by many of outright evasion is, and likely will continue to be, fraught with risk.
I have surveyed the laws and point out legitimate ways to mitigate the tax burden. It will be done under three broad sections, first addressing individuals, then considering businesses and lastly any cross cutting issues.