Well, it seems our leaders skipped the class on history, and Winston Churchill's wise words over a century ago went unheeded. The UDA government is struggling to lift itself by the bucket handle with its proposed changes to our tax system—the Finance Bill, 2023. And it is not going well.
The Finance Bill, 2023 has come under harsh criticism thanks to its proposed absurd radical tax models. The Bill intends to resource the current budget deficit of SH720 billion. The deficit is arising from the demand to meet repayments of due debt stock.
Unfortunately, the debt stock is problematic because most of it was stolen and misappropriated by the political class. Yet the Bill now targets squarely the ordinary citizens and, in some ways, cushions the ultra-wealthy.
This is evident in introducing new taxes on goods and services such as maize flour, wheat flour, cassava flour, telecommunications, fuel and internet data and, ultimately, the increase in the VAT on petroleum products which will shock and possibly cripple all aspects of production, trading and consumption sectors, which will inevitably hit every Kenyan.
This regressive taxation model will deepen the already-unfair economic inequality in the country, where a small percentage of the population holds most of the wealth. The perception that the government is unwilling or unable to tax the rich reinforces the frustration and powerlessness felt by ordinary Kenyans, as it further entrenches economic disparity.
It is also evident that even after failing to tax the wealthy, the government hasn’t displayed intent to address the pilferage actions of the wealthy. This is a toxic recipe for poverty, misery, indignity, unrest, and political instability in the long term.
The government, in its abrasive taxation proposal, has even lost its moral and public good compass by ignoring the basic responsibilities of government.
For instance, in a country where malaria is a leading cause of death, the government proposes to tax diagnostic malaria kits, making proper diagnosis for Kenyans more costly and probably more lengthy. Again, this is a taxation introduced hot on the heels of yet another kleptocratic heist of mosquito nets in the Ministry of Health.
Furthermore, the proposed tax increases on items such as cigarettes and alcohol may be counterproductive. Instead of reducing consumption, these hikes may drive people to the black market, where these products can be obtained cheaply and without paying taxes. Illicit traders will benefit, and the government will lose.
The Bill's potential impact on small and medium enterprises is also an area of concern. SMEs are the backbone of our economy, employing millions of people and driving growth in various vital sectors. However, the proposed tax changes on items such as fuel will significantly strain SMEs.
The increased cost of production may lead to a slowdown in their growth with the potential loss of jobs and significant long-term effects on the economy. The Bill focuses on resourcing the government and fails to spur the needed investment in the economy for job and wealth creation.
The Kenya Kwanza government has also been championing green economies. Unfortunately, it does the opposite in practice. The Bill proposes tax exemptions for people producing plastic materials, which would greatly undermine the greening agenda.
The Bill requires a sober second look before implementation, as it poses several problems bound to cause more harm than good. The public has a right to engage on this Bill in good faith, and the government ought to go back to the drawing board and re-evaluate its priorities before legislating such sweeping changes to its tax system.
If the government is to achieve its goals of revenue raising while maintaining sustainable social and economic growth, it must reconsider the proposed Bill and focus on a more inclusive and humanistic approach to economic development.
One hundred and twenty years later, after Winston Churchill's free lesson advising against over-taxation, the Kenya Kwanza government, in its attempt to tax itself to prosperity, is doing much worse. Kenyans deserve better, and they will not follow submissively as they are driven off a cliff. It is high time the government listened to the cries of its people.
Omar is a lawyer and executive director of Muslims for Human Rights. Gichengo is the National Coordinator of The Institute for Social Accountability