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Marketing Africa
02 MAL32/19 ISSUE
A Taxing Question
O
f late the big issue in Kenya has been on matters taxation
and we have been fed on salivating headlines like ‘The
government goes after the tax dodging big guns’ or
something to that effect purportedly signaling that the tax holidays
for a select Kenyan elite is over.
Given that Kenya has one of the highest tax rates combined with
multiple taxes of the same item, it is not surprising that Kenyan’s or
those that trade in Kenya find it hard to agree on what it is that is
Caesar’s and therefore should be given to Caesar.
We have argued in the past that heavy taxation does not spur
investment and especially in the Kenyan context where taxes are
punitive and do not translate into common services that we can
point at and declare that is where our taxes go.
We have also argued that it is an unfair model where one is compelled
to pay taxes with serious consequences for non-compliance and
proceed to not be accountable for how the taxes are spent to the
point of declaring the government reckless on expenditure.
But why is taxation suddenly the topic of the day as if the Kenyan
government has just discovered that taxes should be paid and are
putting pressure on Wanjiku to pay tax when she has all along been
laden with this burden.
Let us create several scenarios that may explain why suddenly all
we are talking about is taxes and try to figure out what has raised
this subject to fever pitch with the government being hawkish and
intransigent on tax matters.
Can we dare assume that the government has through in-depth
analysis from the population data that it holds and supplemented
by the Huduma Namba registration that it conducted come to an
aha moment that our tax base is too narrow given the amount of one
thousand notes in circulation.
Three million Kenyans file income taxes from a population of fifty
million which tells you that we are either doing very poorly on the
employment creation front or worse that we have no mechanism of
capturing the economic activity beyond formal employment.
We laud and magnify the hustler mentality as we see every day
demonstration of massive wealth being donated to grateful entities
without knowing the source of the wealth, could our meager taxes
be the source hence the clamor to collect more.
High direct tax tariffs are a disincentive and all they do is to make
people creative in ways and means of legitimately avoiding or
illegitimately evading taxation and once ways are found they result
in low revenue collection as willingness to pay taxes is severely
compromised.
Could it be that the effects of the huge government pay bill that was
created by our new constitution has finally caught up with us even
as we continue to malign the ‘punguza mzigo’ initiative of correct
thinking Kenyans.