Tax reform and industrialization policy: a comment on recent development in Kenya

Abstract

This paper examines the relationship between current tax reforms - introduction of the Sales Tax, and abolition of G.P.T. and some consumption taxes - and reform of the industrial protection system. The arguments for industrial protection are briefly outlined and the need for reforming the the Kenyan system is discussed. It is concluded that the tax reform is likely to have a beneficial effect on employment and will reduce inequities in the tax system. The effect on the protection system will be neutral with some exceptions. For protection reform the further step of some sort of export subsidy is necessary, with liberalization of the import licensing system.