VAT on fuel a good example of conspiracy against middle class
By Francis Karugu | September 12th 2018
The introduction of value added tax on fuel has exposed the Jubilee administration’s underbelly on its claim for popular support that the party machinery projects. In their indolence and chase for popularity gimmicks, they have managed to make an economic joke of this country at the expense of the welfare of hardworking Kenyans.
The Kenyan politician has understood the consult of the Kenyan society, and with this, it is possible to make irrational decisions such as borrowing for white elephant projects, and later raising taxes to finance this extravagance. In the scheme of things, the Kenyan society is made up of three categories: the voter, the spender, and the taxpayer. The politician has understood the psychology of each of these categories and with it, which buttons to push.
It will be useful to describe the salient features of these classes before mapping them into the society fit that they occupy.
The first category is the voters: the poor hand-to-mouth citizens who happen to be the majority in an economy like Kenya, as in every other developing economy. They are the ones who benefit from universal basic education and universal healthcare that they don’t pay for. With a few hundred shillings, they will sell their vote to a foul-mouthed politician who will spend the next five years mortgaging the country to Chinese state capitalism.
The other category is the spender: the big business tender baron class, a cabal of the chosen few with very close ties to the centre of power. Its work is to bankroll political campaigns. In return, they are awarded 'low hanging fruit' business deals that will be made available after the elections in a clear case of scratch my back I scratch yours. They are the ones who 'win' tenders to construct white elephant projects on borrowed funds.
This category also understands the need to share its fortune with the politician in a now institutionalised arrangement. This live and let live arrangement has made the comprador bourgeois the most illustrious citizen in Kenya.
The last category is the taxpayer on whose back the above mentioned categories survive. In the bandit economy that Kenya has become, it was always going to be a matter of time before the Government raised taxes, and indeed the Government is not bothered by the outcry on the increased fuels prices because it knows that the middle class segment that is making noise on Twitter will soon move on to other struggles.
Members of the middle class do not go to NHIF hospitals; neither do they take their children to public schools. Yet they are the ones who pay NHIF contributions and sustain KRA with their taxes. These are the types of ballooning recurrent expenditures that have made the Government broke in order to make the voters happy.
On the other hand, the Government has to ideate white elephants in order to create business for the tender baron class, and since the exchequer has been bankrupted by the recurrent expenditure meant for the voter, the Government has to borrow from exorbitantly priced sources.
No wonder when pressed on how the Government spent billions of the first Eurobond proceeds several months ago, Treasury gave a vague explanation of “budgetary support". The Government had no choice but to effect the value added tax on fuel and the current hullabaloo will just die down since at the final tally, it is the middle class that will pay.
It is the middle class that will feel the effect more than the other two classes. And this is just the beginning of the hard ties, if they had not already started.
I have bad news for the tweeting middle class. One of the Big Four agenda items was the construction of 500,000 low-cost housing by the Government, again meant for the poor voter, but it is the middle class that will pay for them. And you guessed right, it is the tender baron class who will laugh all the way to the bank.
In his budget estimates read out to Parliament in June this year, Treasury Cabinet Secretary Henry Rotich announced a proposal to introduce a National Housing Development Fund.
In this plan, it is proposed that employers pay to the National Housing Development Fund in respect of each employee in his or her employment subject to a maximum of Sh5,000. Of course, this means that the Government wants to raid your payslip further in order to finance houses that are meant for people without payslips.
It is a sad day for the middle class in Kenya. Just like the VAT on fuel, a problem that the Government has been trying to run away from for four years, the National Housing Development Fund will be effected once the Government is weary of kicking the can down the street.
Mr Karugu is a strategy and analytics consultant. [email protected]
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