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February 18, 2019

Government Has No Right To Raise Taxes

Treasury. Photo/Monicah Mwangi
Treasury. Photo/Monicah Mwangi

The beginning of December has coincided with the hiking of excise duty taxes on items such as beer, cigarettes, juice, bottled water and imported vehicles.

Treasury in raising these taxes, says it expects to net Sh25 billion more to fund its budget deficit.

Protest would be legitimate.

Ground one would be trust.

Can this Treasury be trusted with any more money from Kenyans?

Arithmetic is easy. It merely entails addition and subtraction.

Try as we might, we cannot get the Treasury to give the simple arithmetic behind the US$2billion (Sh200bn) raised from the London Club, the famous Eurobond.

The money was borrowed in our name, and if not to us, at least to our representatives, the National Assembly, a breakdown of how this money was spent should be given.

This has not happened.

At the same time, the country is caught in a do or die war on graft where it is suspected that hundreds of millions if not billions have been lost.

Today, not one shilling has been reported as having been recovered.

No transformational institutional turnarounds have been announced to reassure that the loopholes through which money is suspected to have been stolen have been sealed.

Then the CS Treasury, Henry Rotich, comes back and demands to raise an additional Sh25bn in taxes from us. For what?

Why not first seal the theft loopholes and recover stolen money and then come say on the strength of that effort, we need to raise more cash in taxes?

This is an insult and Treasury needs to pull itself fast from the pre-2010 days and understand we are living in a new dispensation.

Part of that is open and transparent communication. People’s taxes must be accounted for.

It is well and good to present a budget proposal every June saying how you intend to spend citizens’ money, it should also be a requirement that you keep updating us on how you are actually spending that money.

A question like the one being asked about the Eurobond in the papers daily should not go more than a day without Treasury swiftly responding in a clear and concise manner otherwise it becomes a political talking point.

If the Eurobond money was not misspent, what is so hard about putting half a page in the papers explaining to Kenyans the arithmetic behind the expenditure?

This is why on grounds of trust, there is legitimate reason to protest against these new taxes until greater transparency for public expenditure is established.

The other ground to protest these taxes is that they are poorly targeted and unnecessary.

Poorly targeted because Treasury keeps coming back to the small band of middle class Kenyans to raise taxes, and unnecessary because we are bailing out the Kenya Revenue Authority on its responsibilities to raise that money without a tax increase.

Motor vehicles in this country are already overtaxed on importation. No one except Treasury and KRA know why cars are charged excise duty upon importation.

Excise duty is meant to collect cash that government can use to remedy the effects of having that motor vehicle on the road such as emissions and so on.

When exported, the importing country imposes a tax for importing the emission hazard that comes with that car. That tax is called custom duty. Excise duty is an inland tax whereas customs is a border tax.

So if the excise is covered by the customs duty importers pay on cars, why is the government going ahead and imposing another excise duty?

Besides vehicles, juices and bottled water have been hit with higher duties as well as beer and cigarettes.

This duty is narrowly targeted at the middle class.

In the case of beer, charging Sh100 per litre, flies in the face of recent government efforts to fight against the so-called second-generation liquors.

Some would say the government is having a Marie Antoinette moment, wondering why illicit brew drinkers don’t take beer which is so much safer.

In other words they are out of touch with the populace.

It makes more sense to tax services such as airtime which are already cheap and where the tax will be incident on millions of Kenyans instead of targeting just a hundred thousand or so middle class households.

Finally, KRA would be getting a free pass with these taxes because it is able to make that shortfall without levying higher duties.

Landlords in this country for example are said to barely pay taxes and figures such as Sh90 billion have been thrown around as the amount government could collect from them.

But KRA says it has a hard time identifying them.

This is hard to believe.

A simple request to Kenya Power to provide them with the addresses of all the buildings with multiple electricity meters, and the names of the people who originally requested the connectivity would not take them more than a month and the following month they would be collecting taxes.

These additional taxes are absolutely unnecessary.

Mbugua is a communications consultant and comments on topical issues.

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