Economic experts on Tuesday urged Kenya to reduce the size of government in order to lower tax burden.
“We urge Kenya to reduce the size of government in order to reduce taxation and hence free up funds from the private sector to make investments in the productive sector,” Kwame Owino, CEO of Institute of Economic Affairs (IEA), told a business forum here.
According to Owino, Kenyan public expenditure is equivalent to 30 percent of its gross domestic product (GDP), however the ideal size of public expenditure for Kenya is about one third of its current spending.
He said that raising taxes takes away more money from the public and constrains the ability of market forces to determine efficient allocation of resources.
“A lot of public expenditure on government projects or subsidies either has no good returns on investments or leads to market distortion which reduces the efficiency of the economy,” Owino said.
He added that the government has a huge budget deficit that is financed through borrowing from commercial banks.
“This domestic borrowing has a negative effect on the economy because it reduces the amount of credit available to the private sector to make investments,” he said.
He suggested Kenya reduce the size of government through privatization of state owned corporations involved in commercial activities.
The conference is focused on the business opportunities related to Kenyan President Uhuru Kenyatta’s developing agenda on food security, manufacturing, universal healthcare and affordable housing.