New Taxes on Essential Goods Mark a Tough Start to 2025

In a report by The Standard, Kenyans face a fresh economic burden as new taxes under the Finance Act, 2024, take effect. The Act increases excise duties on essential goods such as sugar, which now attracts Ksh7.50 per kilo, up from Ksh5. Significant taxes also target the entertainment sector, with a 15% duty on internet and social media advertisements for alcohol, betting, gaming, and lotteries. Imported items like ceramic sinks and transformers will face higher excise duties, adding strain to construction and energy sectors. Critics warn of rising costs on basic goods, reduced consumer purchasing power, and slowed economic growth, but the government insists the measures are crucial for addressing public debt and funding services.

The UAE has overtaken the US, Pakistan, and Tanzania to become Kenya's second-largest goods export market, driven by a 118.78% increase in exports to Ksh86.89 billion in the nine months to September 2024. According to The Business Daily, this growth is attributed to increased re-exports of jet fuel, reflecting Kenya's rising status as a regional aviation hub. Other key exports include goat meat and fermented black tea. The UAE's position follows Uganda (Ksh100.51 billion), with the US, Pakistan, and the Netherlands trailing. Negotiations for the Kenya-UAE Comprehensive Economic Partnership Agreement (CEPA) aim to further deepen trade ties. 

Kenya secured Ksh82.46 billion ($638 million) in venture capital funding in 2024, making up 88% of East Africa’s total and 29% of Africa’s VC funding, in a report by The Star. This marks the second consecutive year Kenya has led the continent in attracting startup investments. Large deals in climate tech, including d.light, SunCulture, and Basigo, drove the numbers. While Kenya dominated, East Africa’s overall VC funding dropped 18% to Ksh93.71 billion ($725 million). Globally recognised as part of Africa’s "Big Four" startup ecosystems, Kenya contributed significantly to the continent’s total funding, which also saw declines in regions like Northern and Southern Africa. 

The new Tax Laws (Amendment) Act is set to benefit Kenya’s retirement benefits sector, encouraging more Kenyans to save for retirement. According to the Retirement Benefits Authority (RBA), the law raises the tax-deductible contribution limit from Ksh240,000 to Ksh360,000 annually, helping individuals save more without significantly increasing their taxable income. A new provision allows tax-deductible contributions of up to Ksh15,000 monthly for post-retirement medical funds, easing healthcare concerns in retirement. Pension withdrawals for retirees, those withdrawing due to ill health, or after 20 years of membership will now be exempt from income tax. The Act also simplifies fund registration by requiring retirement schemes to register exclusively with RBA, eliminating dual registration with KRA, as reported by The Standard.
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The Auditor General is set to publish a comprehensive audit on Kenya’s fuel subsidy programme by the end of January 2025 as part of conditions tied to an IMF budgetary support programme. The Business daily reports that the audit will review subsidy parameters, ensuring only funds from the Petroleum Development Levy Fund (PDLF) are used to cushion consumers against fuel price hikes. The IMF flagged non-budgeted subsidies as a fiscal risk, highlighting their impact on Kenya’s debt distress. Past administrations have faced criticism for misusing PDLF funds, with the current government pledging stricter adherence to available resources. The audit forms part of the IMF's multi-year programme that has provided Kenya with Ksh536.5 billion since April 2021. 

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The government has started disbursing Ksh2,000 to 1.8 million vulnerable Kenyans under its social protection program, covering the December 2024 cycle. Payments, which began on January 7, 2025, aim to alleviate poverty and hunger while enhancing quality of life. A new MPESA-based payment system piloted in Murang’a and Marsabit Counties through the E-Citizen platform is set to roll out nationwide by January 2025. Beneficiaries in other counties will continue using traditional bank channels. According to Capital Business, Principal Secretary Joseph Motari emphasised the initiative's role in improving service delivery and reducing inequality, ensuring marginalised groups receive timely support.