Lower taxes can boost economic growth, spur investment and create employment for youth
By Joseph G. Muthama
| June 29th 2021
The Sh3.66 trillion 2021/22 national budget has raised eyebrows.
During the fiscal year, Treasury CS Ukur Yattani proposes to borrow Sh929 billion to plug the huge budgetary deficit. Reading between the lines, the Consolidated Fund Services expenditures will increase from Sh253.5 billion to Sh1.33 trillion.
In the recent past, the Treasury has been pressuring the National Assembly to increase the debt ceiling. Notably, Kenya’s public debt stands at Sh7.2 trillion, about 71.2 per cent of the GDP. In September 2014, the government’s external debt stock stood at Sh1.045 trillion against the set statutory ceiling of Sh1.2 trillion.
Somebody cannot help noticing that the government’s unfettered borrowing spree and white elephant projects, coupled with a financial bailout of insolvent state-owned entities have brought the current lamentable state of affairs.
Worse, the glaring variance between recurrent expenditure and capital development expenditure speaks volumes about the government’s proclivity to spend the hard-earned taxpayers’ money on unprofitable ventures like bloated public servants’ wage bills.
In fact, both the IMF and World Bank have admonished the government on the upsurge of public debt, hence the recommendation for austerity measures like reduction of public service employees and abolition of income tax relief. As Kenyans wrestle with Covid-19, the issue of endemic public debt and high cost of living have become an economic albatross.
The adverse impact of the Covid-19, like the lackluster economic growth and rampant unemployment are conspicuous. Indubitably, the virus has disproportionately affected the poor Kenyans hence the unprecedented unemployment, poverty, and desperation. The Sh3.66 trillion budget in the wake of the pandemic and recession is a herculean task.
Financial problems continue to plague many people. Many households are characterised by low disposable incomes due to a high level of taxation. Rising commodity prices as a result of high petroleum costs have profoundly neutralised increased wages.
Simply put, tax increases to plug the budget fiscal deficit might imperil economic recovery. Methinks lower taxes would spur investment and boost economic growth and create employment. It is high time the government thinks outside the box on how to meet budgetary financial deficit without borrowing and excessively taxing the ordinary and poor Kenyans during the pandemic.
“Making the right decision may be painful in the short term. Making the wrong one is almost guaranteed to be more painful in the long term,” Robert Glazer, the founder, and CEO of Acceleration Partners once said.
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