Why next government must be creative in economic reform plan

The National Treasury office building.

The National Treasury office building. 

Photo credit: Diana Ngila | Nation Media Group


Economic change agenda must be the tipping point for the incoming government. This will involve improving standard of living of the citizenry through various plans and reduction of the high cost of living.

Taxation is central in achievement of any significant economic plan either through generation of the much-needed revenue to finance projects, promoting investments and innovation through targeted tax policies, or alleviating economic hardships through tax reductions, reliefs, or breaks.

The government is currently operating within a very limited fiscal space due to competing demands from recurrent expenditure, ongoing projects, and repayment of existing debts. This requires the incoming government to be creative in implementing its proposed economic reform plans to mitigate unnecessary debt accumulation and foster a conducive business operating environment.

In developed countries such as the United Kingdom, and the United States of America, tax reforms and policies tend to be a central theme for those seeking national elective positions. For instance, the Biden administration campaign was centred on two packages.

One package, the American Families Plan, is meant to fund expanded social and educational programmes with new tax increases on higher-income individuals. The other package, the American Jobs Plan and Made in America Tax Plan, is set to fund new infrastructure spending through increases in corporate taxes and on businesses operating internationally. In France, Macron pledged to continue implementing pro-growth tax reforms in his second term in office.

His main competitor, Le Pen’s campaigned under a completely different tax reform theme. Her promises were exemption from income tax for those under the age of 30, reducing VAT on energy from 20 per cent to 5.5 per cent among others.

These examples are an indication of the central role that tax plans and policies form in the development agenda and plans of national leaders. The next president must critically evaluate his economic plans and the role of taxation in his achievement or otherwise.

Ongoing changes in the global tax landscape will continue to impact the ability of the country to raise revenue from some of the traditional sources and hence the country must constantly adjust its tax policy direction. The role of financial incentives and their effectiveness in attracting FDIs must also be evaluated.

Maina, is a Senior Tax Manager at Ernst & Young LLP (EY).

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