According to the President, the government is at the moment collecting Sh2 trillion and targeting Sh3 trillion by next year. With right strategies, this an achievable.
Taxes in Kenya are categorized into direct and indirect taxes. Indirect taxes are made during purchase of goods. Custom duty, Value Added Tax (VAT) fall under indirect taxes, while income tax under direct tax.
A World Bank report published in October, 2018 entitled “Kenya Economic update , How Kenya Using Tax Revenues to Enhance Access to Education and Health care for low income families “ states that the poorest of 40 per cent Kenya contribute to 14.3 per cent of market income but less than one per cent of direct income On the contrary, 80 per cent of the tax is by the richest 10 per cent of the population. This is partly because there is less formal employment among the poor in the country.
To increase the tax collection, Ruto’s government ought to widen the tax bracket to include all in formal and informal sector. Its common knowledge that some workers in the informal sector earn more that some employees in the formal sector. In urban cities, a mason in informal sector earns more than Sh1,200 per day. If he works 26 days a month the mason earns over Sh31,000 and is eligible for taxation because Income tax Act Cap 470 Section 3(1) states that income tax will be charged on income of person whether resident or non-resident which was derived in Kenya in any year of income.
For Ruto’s government to convince taxpayers to faithfully remit their taxes, there is need for public servants to observe Chapter 6 of the Constitution to earn public goodwill.
During the first tenure of President Mwai Kibaki’s government, Kenyans had goodwill for the government and it was daily occurrence to see mwananchi arrest police officer for corruption. But few months into Kibaki’s government, the Anglo leasing scandal broke out and Kenyans lost faith in fighting corruption.
Similarly, there was lot of hope for reform and confidence in Ruto abilities to make Kenya economy better within 100 days. But with appointment of some CS with suspected integrity issues and some court cases withdrawn, the typical Kenya culture of impatience is creeping in.
I bet if an opinion poll is carried out today, probably the government rating would be lower as compared to two weeks of the President being sworn in.
By large, President Kibaki succeeded in meeting tax targets. He hugely cut government expenditure and reduced borrowing. Ruto should live by his word that he will cut unnecessary government spending. It makes no sense for Kenyans to pay taxes faithfully and see huge government delegations going abroad for official trips. It was murmured in low tones that in the previous government, some senior officials would carry along their hair stylist during trips to Europe.
The Ruto government would have spared the taxpayer funding by-elections had some elected Members of Parliament were not appointed to the Cabinet.
With our debt soaring high, the money funding the by-elections would have serviced our external debts. Some demotivated Kenyans may be reluctant to pay tax knowing that the President had the option of appointing technocrats and save the country the election costs.
President Ruto, like his predecessor has to make decisions that are politically suicidal, but economically beneficial to the country. For instance, President Kibaki had to send over home 400 procurement officer to clean up Treasury and other government offices. This instilled some level of confidence that taxpayers' monies are not lost through corruption.
All said and done, Kenyans eligible by law to pay tax should remember that faithful remitting of taxes coupled with government accountable will catapult Kenya to become an economic giant.
Rev. Dr. Martin Olando is the principal, Bishop Hannington Institute of Theology, Mombasa.
