Working Paper 232
This study examines Kenya’s experience in adopting and implementing international tax standards, highlighting the balance between aligning with global norms and addressing domestic priorities amidst external pressure. It is part of an ICTD research project, ‘Comparative Perspectives on International Tax from the Global South’. Focusing on four areas – tax treaties, transfer pricing rules, exchange of information (EOI) frameworks, and digital services taxation – the study reveals mixed outcomes.
Kenya’s approach to tax treaty negotiations has historically been risky, but the 2010 Constitution has invited more public scrutiny. The country’s progress in transfer pricing is notable but has recently been undermined by a brain drain and capacity gaps. The adoption of EOI has improved transparency and compliance, though delays in accessing critical data from key jurisdictions remain a challenge. Kenya’s recent pivot from a digital services tax to a significant economic presence tax demonstrates the weight of diplomatic pressure that smaller economies sometimes face from larger ones in international policy negotiations. It also paints a picture of a middle-income country determined to exert its sovereignty, and successfully pushing forward its plans to tax digital services. While Kenya has made significant strides in modernising its tax framework, the findings highlight persistent issues with resource constraints, inconsistent policymaking, and external dependency. The case study underscores the delicate interplay of domestic goals and global obligations in shaping Kenya’s fiscal policy landscape.
