Kenya has reiterated its firm position on the ongoing international tax reforms under the OECD’s Base Erosion and Profit Shifting (BEPS) framework, particularly Pillar I and Pillar II, signaling it has no intention of repealing key domestic tax policies despite mounting pressure.
The two pillars are part of a global effort to address tax avoidance strategies used by large multinational corporations, which often shift profits to low-tax jurisdictions to minimize their tax burden.
Pillar I proposes a reallocation of a portion of the profits of the world’s largest and most profitable companies—redirecting tax rights from the countries where income is earned to the markets where products and services are consumed.
Pillar II, meanwhile, sets a global minimum tax rate of 15% on corporate profits, based on a company’s home country.
Kenya’s continued support for these reforms comes at a time of increased diplomatic and economic strain.
In late 2024, the country implemented two key tax measures—the Significant Economic Presence Tax and the Minimum Top-Up Tax.
These moves triggered a retaliatory 10% baseline tariff from the United States under President Donald Trump’s trade policy, citing the new digital tax measures as discriminatory to American tech giants.
Nonetheless, Kenyan officials have indirectly indicated that the government remains committed to the principles underpinning the global tax deal and does not plan to roll back its digital and minimum tax laws.
The firm stance highlights Kenya’s broader push for fairer taxation of multinational corporations operating within its borders, despite geopolitical pushback and potential economic repercussions.
"The question we have to ask is: how is this value distributed? When Levi's or Calvin Klein jeans are stitched in Cambodia and Kenya, then sold in China or India, with the profits accruing to the Global North corporations, which share of the value is global trade and which is not?" asked Ruto.“It stands to reason that when the entire value chain is factored into the trade equation, North America enjoys an even more significant “commercial surplus” from the global trade than is reflected in trade statistics. Indeed, this is the conclusion reached in a study by the European think tank, Centre for Economic Policy Research, published in 2024 titled “Globalisation and Profitability of US firms”, and I quote: “Lower trade barriers allowed North American firms to enter new markets and utilise their intangible assets to boost profitability. Foreign profitability of US firms increased by much more than domestic profitability.”
