As Kenyans wrestle with taxation's burden, frustration and bewilderment prevail. They are wondering when the cycle of ever-increasing taxes will stop.
The tax burden on citizens has steadily increased from income tax to VAT, excise duties and fuel levies. While taxation is vital for government functions, the sharp rise in tax rates and new levies raises significant concerns.
President William Ruto campaigned on a pro-hustler platform, sharply criticising the heavy taxation faced by hustlers during the previous regime, even though he was a part of it. He pledged not to raise taxes further, emphasising the potential adverse impact on low-income individuals, a crucial demographic from which he sought to garner support.
However, since the Kenya Kwanza regime assumed office one year later, taxation has become a thorn in the flesh for the taxpayer. During the inaugural speech, the President reneged on his promise, announcing the discontinuation of the subsidy programme.
This decision led to a surge in the prices of essential goods such as fuel and maize flour. This initial broken promise raised the first red flag, signalling the start of a troubling trend of reduced incomes and endless taxation.
On September 15, Kenyan fuel prices hit record highs, with petrol in Nairobi reaching Sh211.64 per litre, diesel at Sh200.99 per litreand kerosene, primarily used by 'hustlers', at Sh202.13 per litre. These prices will last until October 14, leading some border residents to seek cheaper options in neighbouring countries, potentially harming the Kenyan economy.
The World Bank's 27th Kenya Economic Update warns that increasing VAT on fuel could hinder short-term growth, given high fuel and electricity costs and tight monetary policy. It may lead to decreased government revenue from VAT and income tax, which comprise 76 percent of ordinary revenues.
The regime is now considering more taxes and levies through the National Health Insurance Fund under the Social Health Insurance Bill, 2023. The Bill suggests a mandatory 2.75 percent monthly contribution from employees' basic salaries for the health scheme, a move that will potentially impact disposable incomes. These rates are subject to public participation.
However, we are all too aware of the interference of public participation in Kenya. It often seems like a mere checkbox process influenced by politics, making it an unreliable safeguard against punitive laws. For instance, despite 970 out of 1,080 petitions opposing additional taxation through the Finance Bill, 2023, lawmakers aligned to the regime rammed it through.
Ruto used strong-arm tactics, warning his MPs not to oppose the Bill. Recently, the Senate allocated two weeks for public input for Social Health Insurance Bill 2023, but it shortened it unjustifiably to just three days.
We should not overlook that a profligate regime advocates oppressive taxes to fund illegal and unconstitutional offices, like that of the Prime Cabinet Secretary. It has a notable budget of Sh648 million this fiscal year, surpassing the allocations for crucial bodies like the Women's and Youth enterprise development funds at Sh182.8 million and Sh175 million, respectively.
The Ethics and Anti-Corruption Commission disclosed a shocking reality also. Corruption is siphoning off a third of Kenya's yearly budget. If this trend persists, the country stands to lose about Sh1.2 trillion.
Considering the current fiscal year's budget is Sh3.68 trillion, roughly 7.8 percent of GDP, the Sh1.2 trillion is a colossal sum that could finance the education sector for nearly two years, given that it was allocated Sh628.6 billion in this financial year.
Kenya urgently requires a comprehensive national tax policy that establishes a structured framework for creating and implementing tax-related laws, regulations and rules. Such a policy needs to be revised to ensure the intended regulatory impact of taxes.
The tax system needs more predictability, and the government needs to implement measures to broaden the tax base by identifying untapped revenue sources that do not hinder economic growth. Additionally, it must address tax evasion by high-net-worth individuals effectively.
Moreover, the government should remove ineffective tax incentives, stop wasteful practices, fight corruption and redirect these resources toward sectors that yield high returns, foster sustainable development and improve citizens' welfare.
Programme manager, Inclusion and Political Justice at Kenya Human Rights Commission
