A Covid-Era Discussion: Mobility of the Informal Sector, Fiscal Legitimacy and the Fiscal Contract in Kenya

The document examines how Covid-19 restrictions in Kenya disproportionately affected the informal sector, which comprises 83.6% of the employed population. It argues that a compromised fiscal social contract—characterized by poor healthcare delivery, corruption, and limited transparency—discourages tax compliance among informal workers. While the government implemented some tax reliefs, the authors contend that true fiscal legitimacy requires systemic reforms in accountability, access to fiscal information, and sustainable debt management to ensure an inclusive system.

• The informal sector represents approximately 83.6% of Kenya's employed population, yet the national fiscal system relies heavily on indirect taxes because only 28% of the population is registered for income tax.
• Lockdown measures and curfews severely impaired the informal economy, which lacks the protections and remote-working capabilities available to the formal sector.
• To mitigate economic strain, the Kenyan government introduced several tax reliefs, including reducing the VAT rate from 16% to 14% and lowering the Turnover Tax rate for those with annual turnovers under 5 million Kenya shillings from 3% to 1%.
• The fiscal social contract in Kenya is compromised, as evidenced by the fact that while there are 7.6 million registered taxpayers, only about 4 million actually file annual returns.
• A lack of fiscal legitimacy—driven by corruption in tendering processes and poor healthcare service delivery—leads members of the informal sector to distrust the state and rely on expensive out-of-pocket payments for health services.
• The authors suggest that repairing the fiscal social contract requires improving access to public fiscal information, fighting corruption, easing tax compliance for the informal sector, and establishing a debt ceiling adjustable only by citizen decision.

APA

Waris, A., & Maina, M. (2020). A Covid-Era Discussion: Mobility of the Informal Sector, Fiscal Legitimacy and the Fiscal Contract in Kenya. Public Affairs Research Institute. https://pari.org.za/covid-mobility-informal-sector-fiscal-legitimacy-kenya/

Chicago

Waris, Attiya, and Mwaniki Maina. A Covid-Era Discussion: Mobility of the Informal Sector, Fiscal Legitimacy and the Fiscal Contract in Kenya. Public Affairs Research Institute, 2020. https://pari.org.za/covid-mobility-informal-sector-fiscal-legitimacy-kenya/.

Wikipedia

{{cite report |last1=Waris |first1=Attiya |last2=Maina |first2=Mwaniki |title=A Covid-Era Discussion: Mobility of the Informal Sector, Fiscal Legitimacy and the Fiscal Contract in Kenya |publisher=Public Affairs Research Institute |date=3 December 2020 |url=https://pari.org.za/covid-mobility-informal-sector-fiscal-legitimacy-kenya/ |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{waris2020covidera, author = {Waris, Attiya and Maina, Mwaniki}, title = {{A Covid-Era Discussion: Mobility of the Informal Sector, Fiscal Legitimacy and the Fiscal Contract in Kenya}}, institution = {Public Affairs Research Institute}, year = {2020}, month = dec, url = {https://pari.org.za/covid-mobility-informal-sector-fiscal-legitimacy-kenya/}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }