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Here’s why the cost of living just went up

By David Mugun | April 24th 2014 at 12:00:00 GMT +0300

By David Mugun

Kenya: The decisions that we take, normally have financial implications that we are not prepared for prior to the decision.

Last year, Transparency International reported that eight out of 10 Kenyans have no clue about budgets drafted by their county governments.

That means, the political class will get away (again) with bad spending on account of the population’s minimal knowledge and interest in accountability matters.

The politicians (and government) can get away with money matters, but the rest of us cannot.

As we know, the Government is not a producer but a consumer in nature. This is why it has to find money through various forms of taxes.

Salaries are a factor of production and an increase has to be shouldered by someone through a rise in cost of goods and services.

When other organisations want to rationalise demands for better pay, they commission a salary survey whose findings reveal that peers in the private and public sectors earn equal, higher as the same as them.

The Legislature raised their salaries without feelings of guilt for the resultant consequences. They are now ranked among the best-paid legislators in the world.

These demands then swept across the civil service where service disruptions arising from industrial action forced the government to open the new cardres.

While all this was happening, some politicians struck a populist cord by sympathising with the salary demands knowing all too well, that soon, someone would have to foot the extra bill.

The irony is that when we demand for better salaries in the Civil Service, we are telling the Government to tax us more at the same time.

The increases in the value added tax has resulted from our own choices. We passed a new law in 2010 putting into place a new system of government which is expensive.

But every cloud has a silver lining. The expansion of VAT to almost all items, has more than ever before, made everyone a stakeholder on tax matters.

There is no gain without pain and in this instance, everyone will come to connect the dots on the effects of salary increments and governance structure changes on their lives.

It must sink in, that populist ideas that carry us away in the name of democracy must make financial sense. Going into the future, Kenyans must now exercise care when making collective decisions.

Because it is pinching so much, we must demand better services. Better services need new and positive attitudes to take delivery levels to desired heights.

Teachers must now sign performance contracts just as is the case elsewhere.

In other jurisdictions, schools get shut down and teachers get fired for not attaining predetermined grades per subject taught.

Transferring lazy teachers is no solution at all. That increase in compensation must produce better results this year. The same should apply across the Civil Service.

Now let us get back to our high earners. As said, our high cost of living is self-inflicted.

When the Government has less money, it will always find the balance from our pockets through taxes.

We have allowed high-end earners to pay the same level of tax as the rest of the people on the other end.

Let us face it.

These kinds of top salaries, that are the reason for salary surveys with far reaching consequences on our pockets; through agitation for better pay by our civil service, must be put on a special tax bracket.

Anything past the first million should be subjected to 40 percent tax and the succeeding millions at increments of 10 per cent till the last million returns to the Government.

It will not alter the lifestyles of this expensively paid lot. If unchecked, new salary surveys will aid legislators and perennial salary complainers to keep asking for more.

 With high literacy levels, we need to peg minimal economic knowledge to eligibility to vote so that the masses cease to be rubber stamps of witty raconteurs in the political class.

This must happen now because the same level of ignorance pauses a threat to the stability of the country.

Mr Mugun comments on topical issues.


cost of living Transparency International taxes
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