KRA's punitive tax bid at JKIA is ill-advised

Reasonable people can agree that the Kenya Kwanza administration inherited a mess of an economy and public administration system (for which many of the coalitions leading lights share some responsibility).

The Jubilee administration had borrowed too much, and squandered a good deal of it on bad economic bets (and grand corruption). The deals culture became a thoroughly entrenched feature of public administration, rendering rational policymaking an afterthought. Add to this a series of global economic crises and you understand why the government has been scrambling to stay afloat financially.

We have seen it in the many taxes and levies recently introduced by the government. Yet, even as the government seeks to raise enough revenue to pay for public goods and services and interest on our debts, the medicine should not be worse than the disease. The government should ensure it does not tax the country out of business. The latest example of this problem is the scandal that is the Jomo Kenyatta International Airport (JKIA) international arrivals terminal.

In its hunt for ever more revenues the government has decided that, as a matter of policy, it is going to harass Kenyans and visitors in the name of tax enforcement.

Multiple passengers have reported being harassed to pay taxes on personal items like phones and dresses. Customs officials cavalierly rummage through passengers’ bags without following any protocol. It all looks and feels like a shakedown operation.

The state of affairs at JKIA is emblematic of how far the Kenya Revenue Authority has fallen. There is a big difference between tax enforcement and a free-for-all extortion of unsuspecting passengers. Furthermore, lack of clear guidance leaves a lot to the discretion of individual officials, which in turn opens up opportunities for bribery. Surely, there must be another way.

From a broad policy standpoint, punitively taxing everything that enters the country that costs more than 500 US dollars (regardless of whether it is a personal item) is tantamount to an import-substitution policy.

The government wants Kenyans to stop spending money abroad. However, this approach only works if the things being taxed can be sourced locally. If not, the market will simply find a way to get the same items into the country – legally and/or illegally – and at a higher price.

The net effect will be Kenyans will actually have to spend more of our money (and forex reserves) importing the same products from overseas.

The writer is an Associate Professor at Georgetown University

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