The government has just negotiated a $2.4 billion ( Sh260 billion) credit facility from the IMF. The conditions include that Kenya widens its tax base, cuts subsidies to parastatals and limits the civil servant wage bill.
At the same time, the price of a litre of petrol has gone up to Sh115. Cofek has complained that half of that goes to KRA as taxes.
But what alternative is there? The informal sector is fiendishly difficult to tax. Some powerful people avoid paying tax on rental income but, even if they started paying, it would not be enough to satisfy the IMF.
White collar workers could be squeezed harder and PAYE raised from 30 to 40 percent. But this would make business even tougher for the formal sector.
Like it or not, fuel levies are the most effective way to tax Kenyans. Everyone pays because everyone uses transport. The rich pay more because they have private vehicles. Even the biggest tax dodger has to pay fuel tax. It may increase the price of consumer goods but at least it is equitable in the sense that no-one can avoid it.
Quote of the day: "By what right dare you a colonial judge sit in judgement over me?"
Dedan Kimathi
The Mau Mau leader was executed by the British on February 18, 1957
