Housing levy and taxation call for sober, well-informed debate

President William Ruto during the ground breaking ceremony of the LAPFUND Bellevue Park Residence Project in Nairobi. [PSCU]

That the Kenya Kwanza administration does now own the spaces that drive the public narrative is obvious from the disdain that any of their ideas, progressive or otherwise, get from the real owners of public discourse led by broadcast, print and other media.

While one may disagree with how the new administration has sought to resolve some pressing national problems, one cannot dismiss their identification of the problem and its associated diagnosis.

What has become interesting is the way the national discourse on issues does not even seek to accept the existence of the problem before dismissing the solutions.

If the problem was firstly agreed upon, what the discourse should be about are the options available in dealing with the challenge, which is how way we generally deal with private and public challenges. Two related issues exhibit this reality. One is the general tax issue.  

The other is the much-maligned housing fund. On the tax issue, the place to start is by agreeing that for a country heavily exposed on debt payment obligations, coupled with an economy that requires massive investment of government expenditure on social programmes to improve people’s livelihoods and infrastructure to revamp the economy, there are only two ways of obtaining the needed revenue.

We can either borrow more or tax more. While the latter may look like the less burdensome process, it is actually most painful in the medium term.

Among other challenges, our current debt situation means we can only access very expensive debt with very onerous payment terms. To pay this debt we will eventually drain our revenues leading to higher taxation ultimately getting to the point we were avoiding in the first place.

Levying more taxes is therefore the better of two difficult choices. Of course, we can disagree on which areas to tax more and I wish that our conversation focused on this aspect and not on “we can’t be taxed more” refrain.

Even more critically, the conversation should focus on what we should expect from government from our taxes. It cannot be that I pay for my security, my health care, my children’s education and then pay more tax.

Secondly, are there areas that government is also spending taxes that are purely wasteful and that if reformed would reduce the burden on the taxpayer?

I would expect more informed and data driven public discourse on these aspects of government responsibility than the idle discussion currently filling our airwaves.

The second issue is the housing fund. We must start this conversation by accepting that the housing crisis is unsustainable. Many years ago, I visited the homes of all my staff, and I was embarrassed by the hovels some were staying in. I am sure the situation is worse now.

Many of the people we interact with in our offices live in slums, literally. In the last 30 years, private investors have largely resolved the housing problems of the upper middle class, leaving the bulk of the lower middle and lower classes suffering.

Some urgent intervention is needed. The housing fund appear to me a reasonably well thought through option of resolving several things; allowing government to do what it does best, providing land and infrastructure, while leaving private investors to do what they do best, building houses.

What the housing fund does is to resolve every private developer’s concern; uptake. By guaranteeing investors that it will buy off the houses they build and then offload them to members of the scheme, government ensures that it can get the houses done quickly at massive scale and at reasonable prices.

Are there better ways of resolving the problem? Probably. But it cannot be by asking for voluntary contributions especially at the beginning.

At a time when government expenditure on social services is shrinking it would mean that the government cannot assure any investor that once they complete the developments, there will be sufficient budgetary allocations to offtake the houses.

It also cannot be a “do nothing” approach. Someone once told me that it takes no intelligence to criticise. Our intellectual rigour is evidenced by offering well thought out options. On these two pressing issues, that is a crucially missing component.

-The writer is an advocate of the High Court of Kenya