Uhuru tax reliefs not what ‘doctor ordered’

Parliament must not assume that President Uhuru Kenyatta’s (pictured) tax measures are just what the doctor prescribed.

Kenyans expect the MPs to earn their keep by rising to the occasion and critically interrogating the president’s tax reliefs. We expect the MPs to do what the Congress did recently in the US when President Donald Trump offered $1 trillion to be distributed to every American as a corona rescue package to stimulate consumer spending. The Democrats countered that and finally Congress enacted $2 trillion to include business bailout.

Suffice it to say, the authority to raise, lower and defer taxes is vested on the National Assembly by the Constitution. The problem, however, is that over the last seven years the National Assembly hasn’t jealously protected this turf.

The duty of the National Assembly, it appears, is to simply implement tax increases and impose new taxes exactly as presented to them by the National Treasury.

Now the president has cut taxes but without considering the state of our country. We are not a Wall Street economy like America, and any reliefs offered to mitigate an economic downturn must target and offer respite to majority of the people.

Uhuru’s tax measures presume that trickle down economics are still in vogue whereas, the world over, these economics have largely not lived up to their expectations. They have been a hopeless experimentation.

Besides that, the president’s tax reliefs beat logic. What is the rationale of giving 100 per cent tax relief to people earning less than Sh24,000 but reducing the Turnover Tax (TOT) to 1 per cent? Are these income earners not the same?

Survivalist businesses

Informal sector traders who are supposed to pay TOT don’t earn more than Sh25,000 a month on average and that is why TOT was premised on sales and not profit as happens in other businesses.

Two, more than the corporate world which the president hinged all his attention, the informal sector will bear the brunt of the economic crisis wrought by coronavirus; the sector has no big savings in the banks. A vast segment of the informal sector are survivalist businesses, merely working to eke out a living, rather than make a living.

About 83 per cent of the population works in the informal sector where safety measures of this pandemic like social distancing and ‘stay at home’ simply means not earning a living.

Since the State cannot provide basic income like what the US is doing, why not remove their tax obligations like scrapping TOT and Presumptive Tax altogether?

Food prices

In addition, no tax relief has been offered to push food prices down, yet food is critical in ensuring people stay at home, especially in the event of a total lockdown. Maize millers and Kenya Bureau of Standards have recently raised alarm over the aflatoxin in maize. This means predisposing Kenyans to more illness in the reign of a pandemic. The government should allow importation of quality maize duty free to ensure maize flour prices come down during this period.

Water is essential to life, yet in Kenya clean drinking water is not available even in some parts of Nairobi and other urban areas. In some rural areas, clean water will most likely come with the actualisation of Vision 2030. Sadly, even with coronavirus, bottled water is seen by the government as a luxury and attracts VAT and excise duty.

Some people buy drinking water for safety reasons. Why not zero rate bottled water at least during this pandemic?

Finally, we must learn from the other countries as we decide on tax reliefs. Big economies like India, Brazil, US, Germany, France, UK and others are hoarding food, medical equipment and medicines, yet Kenya, a net importer, still maintains import duty on food and medicine besides crippling bureaucratic customs procedures, like certificate of conformity, that make imported goods very expensive.

Big exporting countries are weary of this pandemic. Even as we protect our manufacturing industry, do we have the capital and energy to bridge the deficits occasioned by reduced or zero imports?

Tax reliefs occasioned by a pandemic must, of course, zero rate all medicines and medical equipment because diseases will be more pronounced now than any other time.

If MPs take Uhuru’s tax reliefs like the doctor’s prescription and passes them, they will have let down a majority of Kenyans.

Mr Waweru is an economic literacy activist and a democracy campaigner