Premium

Why Ruto's 'tax everything that moves' approach is bound to fail

President William Ruto. [PCS]

It doesn’t matter how often the Ruto administration brushes off Kenya’s cost of living debate with the coined language of “we are subsidising production, not consumption; we are growing maize.

The Kenya National Bureau of Statistics (KNBS) Consumer Price Index shows that inflation is falling” and the other jazz Kenyans say belong to “jaba”.

The fact of the matter is this debate is an existential one. And it is as political as it is economic. In truth, Azimio’s “maandamano” has prefaced our future electoral choices; not by better ideas but by feeling quite early in the day this Kenya Kwanza administration’s tone-deaf, “we are smarter than you” language.

For the everyday Kenyan, the daily combo of future promises and “we are fixing the past – defined as Uhuru’s Jubilee administration” is long past its sell-by date. The everyday Kenyan is fed up watching YouTube and TikTok clips of beautiful motorcades and frequent flyer pics of leaders escaping a country where many struggle to get home with enough to provide a meal for their kids.

 Kenya, and Kenyans, cannot afford a “trial and error” government when it is getting worse. One would like to believe that this is the logic, which informs our ongoing National Dialogue at Bomas of Kenya.  Yes, this dialogue is the result of protests that were sequentially termed in local and international media as “electoral justice”, “anti-government” and “cost of living” demos.

But it is also a dialogue that must address our long-term political (“who gets to do what?) and policy as governance (“the doing of the what”) issues.

On the first, methinks an audit of our 2022 election might better explain how the presidential loser won 27 out of 47 counties (57 per cent), 160 out of 291 constituencies (including diaspora, meaning 55 per cent), 803 out of 1,451 wards (55 per cent), 24,999 out of 46,702 polling stations (54 per cent), 63 per cent of GDP but still lost the final tally.

That’s the official data before we get to apparent whistleblowers and potential loudspeakers.

The audit will not reverse the electoral result or the Supreme Court’s carefree language, but it might help us better understand why a third of potential voters voted, another third registered to vote but didn’t, and the final third didn’t even bother to register.  It may actually pay better attention to the KPMG audit report that had more questions than answers on IEBC’s voter register and voter processes, systems and technology.

Done carefully, honestly and independently, this audit might get proper answers on why IEBC procured two books for the presidential vote.

But that’s the recent past. The current precedent asks questions of a Kenya Kwanza administration in place that looks like it is “winging it” on the cost of living answers that are fast adjusting Kenyans to a predatory State that loves to live large. 

The short story here is that Kenya Kwanza has no theory of government, which means it is unable to explain its reliance on terrible (and terribly performing) fiscal and monetary tools when our fundamental cost of living answer is productivity.

Productivity is a large word.  It is a fine combo between getting people to work (actual jobs), preparing people for work (education, health, innovation) and protecting non-work (social protection). As a cost of living answer, Kenya Kwanza is not even close to finding the question.

What we are also not being told is that this government needs a bit of inflation to manage its tight fiscal space.  When taxes and debt are at the limit, inflation is an emergency oxygen for the government.

Public purse

But here’s our local tragedy. Data shows there were over 100 costs of living protests globally in 2022 – when we were busy with elections and “bottom-up ya mama mboga, mama fua, boda boda na yule soldier wa mtaa)

Meanwhile, the world made the short-term cost of living support decisions, from the public purse (energy choices and rebates, reduced telco bills, education support, healthcare discounts) to private income (tax breaks, graduated or one-off income support, business loans and the like).  Sorry, we were busy with the election.

Today, we are not translating our thinking beyond debt to productivity. We are also so busy making Kenya – as the government, not the people - our breakfast, lunch and dinner that we cannot contemplate that the cost of living never actually goes down; it’s mitigated. That’s how our dismal scientists (economists) better define a cost of living crisis as the decline in real incomes. So the long-term cost of living answer might lie in, say, more jobs and incomes? Pesa mfukoni?

That is a question for our Kenya Revenue Authority; a cost-of-living institution that is, through technology, rewriting its playbook from “rules to tax data” to ‘data to create tax rules’. Basically, from “I walk on the road, I will pay tax” to ‘we tax you because the data says you walk’. 

We call this Tax Administration 3.0.  Remember, the cost of living is price rises, which include taxes, and greed.

But this is detail. We have a political dialogue. It is natural that Kenya Kwanza dismissed these talks, while Azimio embraced them. Nobody wants lessons on cooking the home-baked maize meal dumplings we call ugali.  How ironic, then, that cheaper ugali is what these talks must deliver!

This is why the talks, despite arrogant dismissals by Kenya Kwanza nabobs, are not simply important but existential for Kenyans who took to heart loud campaign promises around the reduced cost of living, plus pledges promising no more hunger and more jobs. In quite a few countries where cost of living protests prevail, popular (not populist) politics is winning.

It will happen here as well. But it will be more opportunistic than it is about opportunity. It will uproot a political leadership which appears to lack real answers that resonate with the people today and tomorrow. Let’s fast forward to what our national dialogue should and could do.

As a preface, we must accept our impossible triangulation. Today, we have a fiscal problem (debt) because we have an economic problem (colonial economic model) defined by a political problem (endless politics driven by battles between dynasties created as colonialism’s poster child).

So, the first cost of living discussion begins with the cost of doing business. This is Kenya’s fundamental economic issue, especially at the micro-economic level. As a Ugandan classmate shared on our High School WhatsApp group, Kenya’s economic miasma begins with settler-like ethnic arrogance that despises competition, markets and productivity as actual words.

Unfortunately, a “tax everything that moves” approach, as former US President Ronald Reagan famously described it, fails Kenya Kwanza’s economic recovery legacy, tough times notwithstanding. This regime was to return us to the natural economic logic, which tells us that fiscal and monetary policy (and the IMF) are constraints, but economic policy is ideas.

It is difficult to see how economic, or socio-economic policy works in a transactional administration. The short-term deal is always better than the long-term good. This probably best summarises why every “clever” Kenya Kwanza proclamation costs us more.

The second part speaks to the cost of government. This is an entire subject worth an article of its own (forthcoming), but, as I predicted last week, every ministry, department and agency is raising, or thinking of raising its prices for citizen services. Yet, as we know, government has no money of its own; it’s our taxes and fees. In short, our higher cost of living.

Our third cost of living discussion has not even begun to happen.

Let’s do this slowly. Officials measure our cost of living as inflation based on a fixed basket of goods (ie, we will always eat meat, pay rent, use transport).

That we do not, or cannot, measure, as the US Bureau of Labour Statistics does, the change in spending choices (say, from meat to beans) is a national shame.

Which brings us to the end. Here is a view of irreducible minimums for the ongoing National Dialogue on the cost of living. First, we deal with the cost of doing business.

Secondly, we deal with the cost of government. Third, we deal with the cost of living. The CPI is a useful starting point for determining our drivers of cost. But we need to graduate ourselves from the economic claptrap that differentiates food and fuel from other elements of our price index.

For the uninitiated, the cost of living is as local as it is global; as economic as it is electoral. Let’s simplify this for leaders: the cost of living is existential. Kenya Kwanza’s manifesto prioritised it.

This is about lives and livelihoods, food and shelter, jobs and incomes. Kenyans don’t care about macroeconomic babble and the State’s befuddlement. The truth is that Kenyans can no longer afford cat-and-mouse politics on our lives, livelihoods and living lifestyles.

Business
Premium State of economy: Is Ruto living in denial or just optimistic?
Business
Premium Huge volumes of unsold tea at Mombasa auction raises red flag
Business
Premium We are in the dark, Police Sacco founders question sale of prime properties
Business
New tariff lifts Kenya Power to Sh319 million half-year profit