Opposition leader Raila Odinga now wants President William Ruto to withdraw the Finance Bill 2023 and apologise to Kenyans for the anxiety they have suffered over the tax proposals.
Raila said the Kenya Kwanza administration has ran out of explanations for the proposals in the Bill and has resorted to threats maintaining Azimio MPs will vote against it.
The former Prime Minister, who spoke during Azimio leadership consultative forum on the Finance Bill 2023 in Nairobi yesterday, warned that should Ruto have his way in the National Assembly they will regroup and overrun him in the assembly of the people.
“In the history of budget making in Kenya, no regime has imposed so many and so high taxes on our people in return for nothing but fantasies and fairy tales. This Bill is a disease that cannot be cured with everyday herbs. This Bill is economic sabotage, If Ruto insists on this Bill, this country will go into full recession, this Bill requires and must get fierce resistance,” said Raila.
He said no prudent leader withdraws subsidies on basic goods, then increases taxes on the same goods and without raising salaries of working people.
Raila accused the government of planning to levy taxes on chamas (merry-go-rounds) that are the bankers and lenders of last resort for mothers and youth particularly in rural areas and slums.
He said by imposing these taxes Ruto will strike at the heart of women’s economy, killing savings and worsening poverty of an already vulnerable group.
The Azimio leader said that at a time the National Hospital Insurance Fund and the National Social Security Fund are failing, the President is telling Kenyans to forgo 3 per cent of their salaries and deposit it into “some fantasy called housing levy where nobody knows where it is housed.”
The government cannot agree whether it is a tax or an investment, nobody knows how it became an investment advisor to Kenyans. They ignore concerns by employers and employees that many payslips are already overwhelmed by deductions, loans and lack of pay rise and they ignore concerns that this tax will increase business operating costs and force firms to relocate.
He noted that the government wants to raise turnover tax for businesses from the current 1 per cent to 3 per cent targeting small businesses by reducing the turnover of taxable businesses from Sh1 million to Sh500,000. This means that any small business that sells goods and services worth Sh1,370 daily will pay a turnover tax of Sh15,000 per year, regardless of whether they make a profit or not.
Raila said Ruto promised to respect every job and its contribution to the economy but the Finance Bill proposals are a disconnect from the expected reality. He noted that hard-working youth seeking to eke a living as content creators and social media influencers will be the hardest hit by the 5 per cent withholding tax.
The opposition leader said the government wants to impose a 316 per cent tax hike on beauty products such as wigs, false beards, eyelashes, human hair and artificial nails, among others bearing in mind that the beauty industry is a major employer particularly of women.
“Millions of young men and women eke a living out of salons, spas and barber shops, those businesses face closure, others will have to sack employees, Ruto and Kenya Kwanza are behaving as if cost of living is no longer a crisis in this country, despite existing high prices, Ruto wants to impose 16 per cent VAT on maize flour, cassava flour and wheat flour,” he said. Raila noted that the Bill seeks to impose VAT on agricultural pest control products, transportation of sugarcane, raw materials for fertiliser manufacturing and fertilisers that will push up their cost.
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The former Prime Minister faulted government plans to double the VAT on fuel from 8 per cent to 16 per cent, which means pump prices will increase by Sh9 per litre of diesel and Sh10 per litre of petrol which will further raise the cost of living.
He said healthcare costs have impoverished millions but Ruto wants to expose pharmaceuticals and medicaments to taxation by removing them from zero rated to tax-exempt list.
Cost of fuel
“After raising the cost of fuel, they want to raise advance tax on motor vehicles, advance tax on passenger vehicles will increase from the current Sh2,400 to at least Sh5,000 and from Sh3,000 to at least Sh5,000 for commercial vehicles, trucks will now pay at least Sh60,000 annually up from Sh20,000. Obviously, the cost will be passed to the consumer, making matatu and taxi transportation more unaffordable,” said Raila.
The former Prime Minister noted that the President wants to treat insurance compensation as income and introduce a 16 per cent VAT meaning insurance compensation incase of an accident will no-longer be seen as compensation of what was lost.
Raila said that looking at the proposals, one cannot help asking what planet does Ruto live on or whether he understands what Kenyans are going through. He accused Kenya Kwanza of lying that they inherited a broke country while the truth is the cash crunch has been caused by economic mismanagement, wasteful spending, corruption and hiring of incompetent personnel. The Azimio leader claimed that the worsening economic situation has been manufactured in State House and the Office of the President in the last eight or so months.
He said contrary to what Ruto promised and what he is saying, borrowing has gone up instead of coming down, but strangely the cash crunch continues.
“In September 2022 when former President Uhuru Kenyatta officially handed over to Ruto, Kenya’s total debt was Sh8.701 trillion of this Sh4.33 trillion was external debt while Sh4.366 was domestic debt while at March 2023, that is in six months after Ruto took over, Kenya’s debt rose from Sh8.701 trillion to Sh9.390 trillion with debt rising by Sh689 billion under Ruto,” said Raila.
The former Prime Minster noted that the external debt that stood at Sh4.33 trillion in September 2022, rose to Sh4.851 trillion in March 2023 with domestic debt rising from Sh4.366 trillion in September 2022 to Sh4.539 in March 2023.
He said between September 2021 and March 2022 the debt rose by Sh405 billion from Sh7.96 trillion to Sh8.401 trillion with the external debt being Sh4.209 trillion while domestic debt stood at Sh4.192 trillion.
Raila claimed current government has borrowed more than any other regime.
“They have removed subsidies, raised taxes but the cash crunch has continued, they cannot pay salaries, they cannot disburse money to schools, they cannot disburse money to counties, they cannot disburse money to the elderly, they cannot finance the NHIF and nearly all major infrastructure projects have stalled,” he said.
He said Ruto is trying to change the country’s debt ceiling from the current absolute number of Sh10 trillion to a moving number of 55 per cent of GDP while the debt level is already 60 per cent of GDP and to beat that violation of the law, he (President) wants to force an amendment to the Public Finance Act to allow the National Treasury and not Parliament to set new debt ceiling.
“As the Bill heads to the National Assembly, Ruto must be reminded that excessive taxation is stifling growth, that when people have to park cars at home because of cost of fuel, it is bad for the economy, that when Kenyans postpone travelling up-country because they can’t afford fuel or fare, it is bad for the economy,” said Raila.
Present during the meeting were Wiper’s Kalonzo Musyoka, Narc-Kenya’s Martha Karua, Usawa’s Mwangi wa Iria, ODM deputy party leader Wycliffe Oparanya, Roots’ George Wajackoya and Jubilee’s Jeremiah Kioni.
National Assembly Minority Leader Opiyo Wandayi,ODM National Chairman John Mbadi, Azimio La Umoja Economic Council Chairman Nderitu Mureithi, former Nyeri Deputy Governor Caroline Karugu and Kibra MP Peter Orero were also present.