Fluctuating tax regime in Kenya unfair for businesses

Today’s Budget reading by Treasury Cabinet Secretary Henry Rotich will mark that time of the year most traders dread most.

It doesn’t matter whether you are a small or big time trader. Everyone dreads Budget day in Kenya. For a long time, there has been a misconception that the only people who fear Budget day are companies that sell alcohol, cigarettes and associated products and consumers of these products, because of the ever-changing and punitive tax regime.

But as a kerosene seller who mainly plies his trade in Mukuru, Kayole and Sinai slums in Nairobi, I can assure that Budget day is not only a day of anxiety for alcohol manufacturers.

It is a nightmare to us too, because whatever Rotich says today will determine whether I get or lose more customers. Besides making it difficult to plan for my business, I also find it hard to decide on personal expenditures such as going on holiday or buying priced things like motorcycles for delivery because of the fluctuating tax environment.

The fact that I operate my business in a price-sensitive segment of society, it means that any slight alteration of the tax-regime by just a few shillings is enough to send away or bring me new customers. It might look like paraffin traders like crying foul until you look at the statistics.

Between 2010 and last year June when there was an absence of tax on kerosene, the number of households that directly bought kerosene was high.

In May last year, shortly before the tax hikes on the commodity in June, I was selling about 1,000 litres on a daily basis. But when Mr Rotich reintroduced excise duty on kerosene, which was scrapped by President Uhuru Kenyatta when he was the Finance Minister in 2010, consumption of Kerosene in Soweto, among my customers, reduced to about 600 litres per day.

The question that the many Kenyans who rely on paraffin as a cheaper alternative to LPG and other expensive means of cooking asked after the new tax measure was, why had the State decided to come back to tax kerosene, a commodity viewed as a social good due to its popularity among low income earners? The uncertainty and unplanned tax hikes not only means reduction of the number of customers who opt to use cheaper means like firewood, but is also bad for businesses that sell the community. It means we can’t plan for the next month or year.

As I write this, most paraffin traders have started hoarding their stock because of the expected tax increases in today’s Budget.