Many Kenyans hold the view that the
quality of public services at all levels of government is poor and could
be improved greatly.
A related claim to the agreement
on the quality of basic services is that Kenyans are highly taxed. The
first claim on the quality of services requires no qualification but the
second could be examined.
Discussions about the level
of taxation in Kenya should be informed by some facts and figures.
Detailed data issued by the Treasury during the budget statement in Parliament shows that taxes have risen by ten percentage points to comprise 96 per cent of all revenues in the period from 2012.
Detailed data issued by the Treasury during the budget statement in Parliament shows that taxes have risen by ten percentage points to comprise 96 per cent of all revenues in the period from 2012.
In
that same period, total revenues of government went up from Sh848
billion to Sh1.18 trillion for the budget period starting in July 2014.
What
this trend suggests to taxpaying citizens is that the reduction of the
tax burden is not a priority for any arm of government.
The
picture is discouraging for citizens interested in lower taxation as
the strong trend is towards increased collection of taxes, with spending
rising in higher proportions and the rest supplemented with debt.
When
it comes to constraining spending, all independent commissions and
three arms of government are in on the game; to tax Kenyans and
distribute among the institutions. There is no voice in the public
sector that calls for reducing the burden of taxation on Kenyans.
The
executive and legislature occasionally call out on institutions that
make wasteful choices, but a consistent voice for reduction of taxes in
either arm of government is conspicuously absent.
Traditionally,
the idea of forcing spending restraint on the executive is one of the
roles that the legislature should play but this is among the monumental
failures of Kenya’s legislature. Dissecting taxation policy keenly is a
task that may be difficult but that is no reason for the legislature and
its committees to avoid it.
"LACKING ASSERTIVENESS"
The
result of this absence in setting taxation policy is the undue
deference to the executive on spending and more sensible tax policy.
After
hurriedly passing the Value Added Tax law in 2013, the legislature
reopened the discussion this year with proposals for exemptions here and
there.
Even after admission that the cost of living
had risen, the National Assembly succumbed without careful examination
to the argument by the executive that any reduction in the applicable
VAT rate of 16 per cent would be unsound policy.
By accepting that argument, the National Assembly once again surrendered its responsibility as the purse holder.
Separate
from the momentum for tax collection, rising expenditure and a
legislative body lacking assertiveness in setting tax policy, is the
paucity of ideas on raising non-tax revenue.
For all
the underperforming assets that the public sector holds, it is notable
that the privatization programme has been packed in the freezer again.
In the estimates for revenue in this year, only 3 per cent of the
revenues will be derived from other sources.
Instead,
the Cabinet Secretary proposed infusion of a further Sh700 million into
an abattoir, the Kenya Meat Commission (KMC). One can safely place a bet
that this is not the last subvention for this firm because this sum
will place it in a momentarily good position to be able to claim more
resources in a couple of years. Good intentions, bad ideas.
The
composition of tax revenue suggests that up to half of all taxes in the
coming financial year will be from payroll and corporate profits. This
situation means that the burden of taxation falls primarily on formal
sector workers and corporations.
It is understandable
that these are established, consume some public services and are
therefore rightly expected to shoulder the tax burden.
However,
considering that most of those who pay income taxes are also the
purchasers of goods and services to which most consumption taxes apply,
this burden of taxes begins to look disproportionate, and the situation
of where the tax burden falls is one that the proper political
discourse in both the Senate and the National Assembly is absent.
Against
this background of a Parliament that is led by the nose in respect of
tax policy, an inbuilt momentum for rising spending in the arms of
government, no ideas for alternative revenue and a tax burden that falls
mostly on workers and few formal sector corporations, who would blame
Kenyans for maintaining that this is a high tax country?
Only the legislature can begin to fix that. Will the small government legislators stand up?
Kwame
Owino is the Chief Executive Officer of the Institute of Economic
Affairs (IEA-Kenya), a public policy think tank based in Nairobi.
Twitter: @IEAKwame
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