Rather than increasing taxation, we should focus on growing the economy

IMF chief Christine Lagarde. The IMF focuses on numbers, not people, and their advice has never raised the economic status of any country. SAPs were implemented from a template that barely recognised the peculiarities of each country. PHOTO/FILE 

In Summary

• I would be cautious taking this advice, for the IMF focuses on numbers, not people, and their advice has never raised the economic status of any country.
• There were some positives, like the selling off of some parastatals, such as the Kenya Posts and Telecommunications, which then provided the space for the mobile telephony that is now indispensable.
• We certainly need to improve our roads, health care, trains and security as crucial pre-requisites. 

By Maina Kiai
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The IMF boss, Christine Lagarde, was in Kenya the past week and freely gave us advice on improving our economy.

I would be cautious taking this advice, for the IMF focuses on numbers, not people, and their advice has never raised the economic status of any country.

Yes it is useful when countries get into fiscal crises and need liquid cash to meet their obligations, but some of us remember the painful Structural Adjustment Programs (SAPs) of the 1980s.

SAPs were implemented from a template that barely recognised the peculiarities of each country.

There were some positives, like the selling off of some parastatals, such as the Kenya Posts and Telecommunications, which then provided the space for the mobile telephony that is now indispensable.

But they also brought in painful changes that weakened us, introducing increased fees in schools, hospitals and social services, as SAPs focused on reducing state involvement not just in the economy, which is a good thing given the corruption in Kenya, but also in essential services that are taken for granted in the West.

One of the key roles of the state is to provide quality free public education, quality free healthcare, and quality free social services and infrastructure. And it does this through taxation, which this regime has been increasing at every turn.

Taxes need to be used efficiently and transparently.

But in Kenya, our taxes are openly stolen and misused.

It is the 30 per cent of the budget that is pilfered each year according to the Treasury itself, with no accountability.

It is the huge remuneration costs for the political and civil service elite, including the infamous Sh80,000 “buttock” (sitting) allowances.

Part of the scramble for positions in boards of parastatals is for these excessive “buttock” allowances that many live off comfortably. It is the above-market prices for buying and building houses and office buildings for our Big Men.

And now the state wants to re-impose the Capital Gains Tax — upon IMF advice.

Yet the massive expansion in real estate development and construction — with the attendant jobs and money circulation — is a result of removing this tax.

We will surely see a decline in this sector with this tax.

Rather than increasing taxes, the regime should be focusing on expanding the economy. And the tourist sector has huge potential for expansion.

I was pleased with the December announcement that Kenya will relax its stringent anti-African visa rules to enable more Africans to visit and do business in Kenya.

That is long overdue. Making it as easy for a Nigerian, Senegalese, or Malian to enter Kenya as it is for an American, Chinese or German is not only right, but makes sense economically.

But we need to also work on our infrastructure to expand tourism.

France gets more than 70 million tourists a year, with the majority visiting the city of Paris and its attractions.

Yet in Kenya, we celebrate receiving 1 million tourists as a milestone. Interestingly, African tourists to France were recorded in 2009 as the second largest group of tourists.

And look at what we have: wonderful and unique flora and fauna; stunning beaches; forests and mountains; deserts.

We certainly need to improve our roads, health care, trains and security as crucial pre-requisites.

Thus, apart from African markets, China, India, Brazil are obvious markets as their middle classes increase, but we should not forget Taiwan, Japan, Norway, Germany, Holland, Belgium and Finland, whose economies are holding strong. And we could focus on cultural tourism from India and Middle East.

Doing this — instead of increasing taxes — will be better for ordinary Kenyans, especially if combined with the necessary task of reducing the high remuneration of our elite.