Fiscal Incidence Analysis for Kenya : Using the Kenya Integrated Household Budget Survey 2015-16
Kenya has made satisfactory progress in reducing poverty and inequality in recent years. Economic growth in Kenya between 2005-06 and 2015-16 averaged around 5.3 percent, exceeding the average growth of 4.9 percent observed for Sub-Saharan Africa....
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| Format: | Report |
| Language: | English |
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World Bank, Washington, DC
2018
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| Online Access: | http://documents.worldbank.org/curated/en/868291530853143237/Fiscal-incidence-analysis-for-Kenya-using-the-Kenya-integrated-household-budget-survey-2015-16 http://hdl.handle.net/10986/30263 |
| Summary: | Kenya has made satisfactory progress in
reducing poverty and inequality in recent years. Economic
growth in Kenya between 2005-06 and 2015-16 averaged around
5.3 percent, exceeding the average growth of 4.9 percent
observed for Sub-Saharan Africa. This robust economic growth
resulted in a reduction in poverty, whether measured by the
national or international poverty line. The proportion of
the population living beneath the national poverty line fell
from 46.8 percent in 2005-06 to 36.1 percent in 2015-16,
showing a modest improvement in the living standards of the
Kenyan population. Similarly, poverty under the
international poverty line of US$ 1.90 a day declined from
43.6 percent in 2005-06 to 35.6 percent in 2015-16. At this
level, poverty in Kenya is below the average in sub-Saharan
Africa and is amongst the lowest in the East African
Community (World Bank, 2018b). However, the proportion of
the population living in poverty remains comparatively high
in Kenya and the rate at which growth translated into
poverty reduction was lower than elsewhere. At twice the
average, Kenya’s poverty rate is still high for a
lower-middle income country, a group that Kenya joined only
in 2015. In addition, the Kenya’s growth elasticity of
poverty reduction, the percentage reduction in the poverty
rate associated with a one-percent increase in mean per
capita income is only 0.57, lower than in Tanzania, Ghana,
or Uganda (World Bank, 2018b). This leads to the obvious
question of what can be done to make economic growth more
pro-poor in Kenya. This study assesses the distributional
consequences of Kenya’s system of taxes and transfers,
covering 60 percent of revenue and between 25 and 30 percent
of government spending. The analysis of fiscal incidence and
distributional consequences of Kenya’s tax and transfer
system is an important input for designing pro-poor policies
and potentially for influencing the rate at which economic
growth translates into poverty reduction. In this study,
direct taxes and transfers, indirect taxes (VAT and excise
duties), as well as public health and education spending are
assessed in terms of their distributional impacts. Overall,
these taxes and transfers account for about 60 percent of
revenue and between 25 and 30 percent of government spending. |
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