Fine balance between politics and economics

Politics and taxes are symbiotic. They are also power twins that balance each other or collapse a geopolitical entity. Through persuasion or use of force, people agree to pay taxes as a form of loyalty to the state and acceptance of its legitimacy. Taxes are emotive and inability to address related concerns leads to de-legitimisation and shifting of loyalties.

Addressing perceptions of excessive taxation is politicaland requires command of “political economy” or the ability to balance politics and economics. Failure to grasp this can lead to civil commotion. Kenyan officialdom seems guilty of not grasping the essence of political economy.

Kenya has experienced troubled times and its public relations posture is wanting. Anxiety seems to drown perceived achievements. Thorny tax issues have cast a shadow on President Uhuru Kenyatta’s engagement with leaders of powerful countries such as the United States, the United Kingdom, and China. While members of Parliament maintained Uhuru’s fuel tax, it was the acrimony in doing so that captured public attention. The image was one of being less than straight.

In paying taxes, people accept the legitimacy of those in power, but when perception arises that those in high office do not contribute to the taxes they consume, public ire rises. In the prelude to the 1789 French Revolution, for instance, finance ministers lost jobs for suggesting that aristocrats pay taxes.

Pay taxes

The revolution was consequential to overtaxing ordinary people to exhaustion. When Kenya’s then Finance minister, Amos Kimunya, suggested in 2008 that MPs pay taxes on allowances, the MPs said, “Kimunya must go”. The subsequent public ire was evident.

Kenya came close to a “revolution” because public ire resurfaced due to a combination of annoying realities that gave rise to punda amechoka resistance. In the process, seeming disorder in the Government drowned possible successes. Jubilee seemingly lost control in critical counties as MCAs started misusing “impeachment” powers. In Nairobi, reportedly because Speaker Beatrice Elachi refused to give them financial “treats”, MCAs “impeached” her and warned Governor Mike Sonko he would be next.

There are threats to the country in the form of resistance to perceived inequities, among them the impression that new taxes are not necessary and are externally induced. It appears to feed into devastating policy-induced inflation arising from value added tax to existing taxes, which make charges of official aloofness hard to refute.

Treasury officials

The Treasury explanation, legally sound as it may be, fails to convince an agitated public because it is not sound political economy. The belief that Treasury officials answer to the World Bank and IMF makes them appear callous in not considering the political and economic ramifications of their decisions. It has been a public relations disaster.

The perception that IMF and the World Bank ordered the imposition of taxes and reduction of services is destructive to the country’s self-image. For several years, Kenya prided itself on being independent, free of external dictates. As the IMF/World Bank petrol reality that is causing socio-political havoc sinks in, the ability to make such claims of “independence” reduces proportionately.

The impression that Uhuru is politically wounded gives space to different operators to push their agenda and take the initiative away from the presidency. The court “stopped” the implementation of the new oil tax. Religious “leaders” met at Ufungamano to cater for the personal whims of regional power brokers by calling for increased executive political positions. The call is not new, having been rejected in 2017, but the timing was designed to exploit perceived Uhuru vulnerability.

The negative effects are mostly political, although based on economic realities. There is little counter argument to repeated news about billions of shillings wasted in organs of the State.The ripple effect of new taxes was immediate; food and transport prices shot up. The narrative was that the increased cost of living would slow down economic growth by undercutting individual purchasing power of ordinary people. Likely loss of market due to unaffordability of end products would lead to factory closures, economic dislocation, and increased unemployment. The message: plug corruption and wastage to stem the rising punda amechoka resistansce.

Prof Munene teaches history and international relations at USIU; [email protected]