Even after the recent uproar over new tax measures, the Kenya Kwanza government is clearly not done with Kenyans.
The National Treasury has unveiled its Medium-Term Revenue Strategy in which it proposes a host of new taxes it plans to implement between now and 2027.
They include a hike in VAT to 18 per cent from the current 16 per cent, a carbon tax on petrol and diesel vehicles, slapping motor vehicle owners with an annual wealth tax and introduction of VAT on insurance services.
Learners who love extra-curricular activities will also be required to pay more as the government considers introduction of VAT on education services like swimming. For a government that promise to grow the contribution of creative and sports sectors to the economy, this would be the wrong way to go about it.
Treasury is also targeting agriculture with a five per cent withholding tax on produce delivered to cooperative societies. While the sector may be undertaxed, it is also a sector that has been grossly neglected by the government, with farmers having to do without extension services while grappling with poor quality inputs, loss of their crops whenever adverse weather hits them and post-harvest losses due to lack of infrastructure and government support.
It is noteworthy that Kenyans are yet to come to terms with the new taxes being implemented following the enactment of Finance Act 2023. The Act that came into effect in July increased VAT on fuel and saw the pump prices shoot to their highest levels ever. Other than transport, where fares and cost of moving goods went up immediately, other industries are adjusting their product prices to factor in the higher transport costs as well as production costs for firms that rely on diesel for production.
Higher PAYE taxes and the housing levy have reduced the amounts employees take home and affected their spending power.
To make matters worse, Kenyans are yet to recover from multiple shocks including the three-year drought, Covid-19 pandemic, high cost of credit and disruptions that are beyond Kenya's control such as Russia's war in Ukraine.
While it is not in doubt that the government needs to grow tax collections, the impact of recent tax measures and the new proposals are likely to make matters worse for Kenyans, the same people the higher tax revenues are supposed to serve.
As it mulls the new taxes, the government would do well to remember the words of former UK Prime Minister Winston Churchill: "for a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle". Overtaxing the populace will not take our country forward. It might have the opposite effect.
What the government should perhaps do is to minimise tax evasion which Treasury has blamed for its failure to consistently grow tax revenues in line with its aspirations. Bringing into the tax net what Treasury terms as the hard to tax sectors such as the informal and digital ones, can also do the trick. But not inflicting more pain on those already in the net.
