Knee jerk State policies hurting ordinary citizens

**Perhaps therein lies the rub! That no one in Kenya takes responsibility for things when they go egregiously wrong.**

The most dangerous way to make decisions is to put them in the hands of those who pay no price for being wrong—Abdalla Sheikh.

Alex (not his real name) saved for five years. Flush with the exuberance of youth, he eschewed simple economic principles of growth induced by earnings, savings and investment. He put a down payment on a car that was overseas. While his contemporaries debated whether a vehicle was an investment or not, Alex indulged himself in what society considered a meaningful metric of success.

Because Alex’s Audi was being shipped from the United Kingdom, he put aside money for customs duty and other levies. Meticulous to a fault, he borrowed exhaustively from family and friends, certain that he had the wherewithal to cover any eventualities.

However, a couple of days to the landing of his car, Alex got the shock of his life. Kenya Revenue Authority (KRA) had yet again, arbitrarily reviewed the Current Retail Selling Price (CRSP) of all vehicles, effectively doubling whatever duties Alex had budgeted for. Ultimately, he was unable to clear his car and lost it at an auction to defer its storage charges.

The manner in which public policy is mooted and executed under the Jubilee administration has left a lot to be desired. In the words of Nairobi Senator Johnson Sakaja, “it is as though the Government is at war with its own citizens”. At a basic level, public participation is needed in coming up with policies that directly impact lives of citizens. The constant knee-jerk reactions witnessed lately reflect poorly on the integrity of the policy making process.

An edict

For instance, the Government banned the carrying on board of food on Standard Gauge Railway (SGR) train to Mombasa but promptly rescinded the decision after a public outcry. Then an edict by Transport Cabinet Secretary (CS) sought to make SGR the sole conveyor of imported goods from the coast to the rest of the country. After a week of demonstrations by those affected, the decision has since been overturned.

What has precipitated these erratic decisions? What has prompted the arbitrary raising of taxes and the manner in which policies are made and discarded? It is an open secret that the Government is hurtling towards insolvency.

A World Bank report on the country says “Kenya’s external debt is at the highest level it has ever been and now exceeds the maximum recommended level in relation to Gross National Income (GNI)”. GNI is the total money earned by a nation’s people or businesses. Kenya’s external debt stands at 34 per cent of GNI.

The Government’s recourse to meet external debt payments has been to be creative around tax collection. Little wonder then that Capital Gains Tax, currently at 5 per cent is proposed to rise to 12 per cent. Many betting companies have been taxed to closure.

Tax regimes

Car importers can hardly plan for payment of duties without additional levies being sneaked in. What the Government forgets is that high taxes only serve to spur avoidance and evasion. Companies are increasingly being incorporated in jurisdictions where the tax regimes are friendly, and profits repatriated accordingly.

Further, taxation should be commensurate with the level of services provided by government. A comparative look at Britain, where income tax is at 20 per cent, shows it to provide far greater value for money than Kenya at 30 per cent of the same.

In Britain, the Government provides free quality medical care for all citizens. It also provides social housing and free primary and secondary school education. Public infrastructure is well maintained with the government taking responsibility for any vehicular damage occasioned by rare potholes on roads.

Perhaps therein lies the rub! That no one in Kenya takes responsibility for things when they go egregiously wrong. Like the Transport CS’s edict to transport all goods on the SGR that affected 15,000 trucks, 50,000 drivers and turn-boys, 3000 spare parts shops with over 300,00 employees and suppliers; over 10,000 mechanics, and 42,000 Kenyans directly affected by closure of 23 Container Freight Stations. In other jurisdictions, the CS should have resigned.

No one wants to take responsibility for job losses in banks because of the deleterious effect of capping interest rates, or from betting companies that have been run out of town. Still, no one talks of multi-nationals like Nestle, that moved to jurisdictions with friendlier tax regimes.

No country develops by high taxation. Public policy ought to be informed by cogent rationale and not capricious whims that border on desperation. Could Kenyan leaders learn to make decisions and take responsibility for the consequences?

Mr Khafafa is a public policy analyst