On September 22, 2021, this column warned of impending increases in taxes. It attributed the same to the country’s profligate borrowing with the debt to GDP ratio at 68 per cent at the time, highlighting the need for increased revenues to service public debt.
It said, “taxes like VAT and excise duty were the low hanging fruit that the government would recourse to and that would raise revenues fairly quickly without fundamental changes to the tax system.” It also spoke of harder times in the foreseeable future, saying, “taxes would not come down despite popular protestations,” and that, “Excise taxes and VAT would probably go up with the latter approaching the late teens.”
The proposals contained in the Finance Bill 2023 released last week reveal the percipience of this and other columns. PAYE has been increased from 30 to 35 per cent for Kenyans earning more than Sh500,000 per month. Excise duties have been levied on a number of items; 30 per cent on imported furniture, 15 per cent on imported paints and varnishes, 10 per cent on imported mobile phones and 5 per cent on accoutrements of beauty like human hair, artificial nails, wigs and eyelashes.
Professor XN Iraki of the University of Nairobi Faculty of Business and Management Sciences describes the Finance Bill 2023 as “a bold attempt to wean Kenya from debt reliance.” International Monetary Fund Managing Director Kristalina Georgieva lauds the efforts of the government in the face of parlous financial straits, saying, “it has been taking very prudent measures both on the fiscal front and on the monetary policy side.” It is clear that President Ruto’s administration is doing its best in challenging times with very little wriggle room.
But there are still a couple of things that can be done to extenuate public perception that citizens are overtaxed without a commensurate return in terms of representation and services. First, the government should prioritise the payment of all pending bills in the public sector. This is at both county and national levels. These bills have arisen from the supply of goods and services to the government that are yet to be paid for many years later.
Delays in payment have broad ramifications on the macro economy. They have led to the inordinate increase in non-performing loans. Local dailies are now replete with auctioneer notices of contractors or suppliers foreclosed for not servicing their loan facilities. Then there is the precipitate reduction in monetary circulation in the economy leading to decreases in tax revenue collections. Further, the angst caused has led to despondency in the business community.
Second is the perception that public appointments are skewed in favour of one community. There is some background to this. The Kalenjin nation has for decades placed a premium on education. This started in the days of President Daniel Moi who built schools and ensured they were well staffed and equipped. Presently, the community has arguably one of the highest concentrations of PhD holders and professors per square kilometre in the country.
It follows then that scores of these learned sons and daughters find themselves at the top of shortlists in the curation of public officers. When it comes to meritocracy, no one can argue against their stellar qualifications. However, Kenya is composed of other communities who feel excluded from government appointments.
The perception of exclusion has been the bane of past administrations including former president Uhuru Kenyatta’s. Kenyans are resilient in the face of adversity. They will put up with exigent tax regimes but not countenance perceptions of exclusion from government. For the country to move forward through hard times, that perception should be managed.
-Mr Khafafa is a public policy analyst