Tax Awareness and Fiscal Workarounds in Contemporary Kenya: Reactions Towards New Taxation Laws, and the Need to Renew the Social Contract

This working paper highlights the awareness and perception of taxes among ordinary Kenyans, with a particular focus on how they situate taxes in their wider universe of obligatory payments. The paper first describes how Kenyans understand the nature, social meaning, and importance of taxes and how these understandings changed during our research, which took place shortly after the enactment of the unpopular Finance Act 2023. The temporal proximity between the period of our data collection and the enactment of this law provided a rare and unique lens for a study of how ordinary citizens view taxes. Apart from exploring how rising taxes on digital financial services influenced economic behaviour among Kenyans occupying different economic classes, the paper also describes how these Kenyans increasingly made use of ‘fiscal workarounds’ to strategically avoid taxes whereby they clearly positioned themselves against some of the unpopular taxes forced down on them, citing the high cost of living and waning public confidence in the political leadership as their reasons. We conceptualise ‘fiscal workarounds’ as the idea that citizens do not simply accept or reject taxes but rather engage in practices that redefine, revise (albeit theoretically) and resist taxes depending on how they experience them. Although not novel, these ‘fiscal workarounds’ were now increasingly justified by citizens who pointed to the political elite’s failure to fulfil their part of the social contract. The paper concludes by offering insights for policy adjustments that could help renew the social contract between Kenyan taxpayers and government as their agents.