The Kenya Revenue Authority (KRA) Commissioner General Githii Mburu rarely smiles before media cameras.
I am not sure if it is deliberate or it is simply his style. Amid the ravages of Covid-19, Mburu has had one of the toughest jobs in the country - raising more taxes in a depressed economy.
It’s a tough job because taxes are the best alternative to debt, which Kenyans have been complaining about.
Paradoxically, while Kenyans are fond of complaining about debt, they do not like paying more taxes. They cite corruption and misappropriation of tax revenues as the key reasons.
If you recall the American war for independence, the revolutionaries demanded there can’t be taxation without representation. Since we queue to vote, we should by extension be proud of paying taxes. We are represented! Through the Building Bridges Initiative, we want even more representation.
There is something patriotic about paying taxes, which the Kibaki regime rode on to a point of making us almost self-reliant. The International Monetary Fund and the World Bank took a back seat at the time.
No wonder around that time, Kenyans were voted as the most optimistic people in the world. It is more like being able to take care of your family from paying dowry to housing them; you feel so proud.
Kenyans even feel proud of being “sponsors.” I can pinpoint a sponsor by the confidence they exude. Besides, paying taxes shows that you are doing well; you still keep 70 per cent of your profit. This should be the key motivation to be an entrepreneur. Taxation is an emotive issue and not a popular topic in business schools despite its national importance.
Maybe with Covid-19, taxation will take its rightful place in the national psyche.
I have a few suggestions on how KRA can enhance tax revenues during the pandemic and beyond and even perhaps make the taxman smile. But you can’t get something out of nothing. We can’t demand good roads and other services without paying for them. How can we make the Kenyan public proud of owning and sponsoring public goods?
It has been argued that by bringing more Kenyans to pay taxes, the burden will be lighter. That has worked by using the KRA Personal Identification Number in most transactions and demanding every Kenyan of age file taxes. To raise more revenues, we should shift to dangling the carrot; it works better than the stick. Beyond KRA penalties, I have a few carrots.
The first suggestion, but which appears counter-intuitive, would be to reduce the tax rates. This would lead to more tax revenues, especially when it comes to Value Added Tax.
Can KRA analyse tax revenues after the rates were reduced while considering economic growth?
Two, KRA should ensure it pays any tax refunds on time, the same way it sets deadlines for paying taxes. I recall getting a cheque for any overpaid taxes the same day I filed my taxes during my time abroad.
Three, the government should ensure that taxes go to the right use. On this, KRA is constrained due to the politics of the day.
How about letting citizens or businesses come together and undertake a public project and offset it against their tax obligations? This would save on tendering and other ills in public procurement.
KRA can cost that work objectively. If the law does not allow, we can change it.
There are lots of public goods that can be offered more efficiently and cost-effectively by the private sector such as prisons in the US.
This would also shift money from salaries and wages to development. We need to build the productive capacity of the nation to avoid the culture of living one day at a time.
On using our tax revenues, political leaders often focus too much on tangible things - what voters can see. We can see a road, but we overlook a healthy or educated population.
Can we match the money used on tangibles to fund “invisible” yet crucial areas like education, health or research? Think of the money used to build the Standard Gauge Railway going to schools.
The fourth carrot is for KRA to start a consulting wing to help businesses expand and pay more taxes.
Imagine a KRA official visiting your business at 7am and asking you with a smile: “How can we help you expand your business?” Then in the afternoon, a county official does the same?
KRA can work with business schools and reputable consulting firms to help businesses expand. The consultants could be paid based on the increase in tax revenues from the businesses.
KRA can make matters even sweeter; give businesses a tax discount if they attain certain targets. If a business pays Sh100 million in taxes in a given year and can double this over the next year, they can be given a bonus of say Sh10 million. Incentives work miracles.
Fifth, KRA as part of its corporate social responsibility, should invest in the establishment of tax education clubs right from primary school to universities.
This would help to build patriotism and ownership in tax payments as part of our national pride.
- The writer is an associate professor at the University of Nairobi