By Steve Ogolla
For the avoidance of doubt, the proposed taxes are illegal for being arbitrary, chaotic, excessive, oppressive, and out rightly punitive. A reading of the President’s Memorandum on his refusal to assent to the Finance Bill, 2018 reveals a shocking and depressing clandestine move to outmaneuver Parliament in its quest to defer implementation of the 16% VAT on petroleum products. The president has given by one hand, revising downwards the VAT on petroleum products from 16% to 8% while cleverly enhancing otKher taxes to re-establish and exceed the 8% revision.
It is important to note that the foundational justification and guiding philosophy for decampaigning and ultimate deferral of the 16% VAT on petroleum products, was and still is that Kenyans are unnecessarily burdened by a large multiplicity of taxes that makes it difficult to live a productive and meaningful life.
Rationale for Taxation
Granted, the government has a legitimate need to impose and require compulsory contributions, in the form of taxes, from the people residing or carrying out lawful business in the country. Once collected, the contribution is utilized for the benefit of all people. A wider tax base, of course, helps the government to finance expenditure, develop infrastructure, and provide social services. However, the framing of the development agenda, such as Uhuru’s Big Four, must be informed by a proper calibration of priorities to be implemented in the order of importance and urgency.
A tax regime cannot be founded on the philosophy of “suffer today, for a better tomorrow.” In the Kenyan context, being a poor country, development should be framed, in the first instance, to mean expanding the real freedoms that people enjoy, including especially freedom from hunger and disease.
A country ravaged by hunger and starvation, for instance, has no business, really, prioritizing funding mega-infrastructural developments and asking the citizens to pay for it. If the people cannot put food on the table, how are they going to raise money to build highways?
Punishing the Youth, and their Guardians
It is important that Kenyans are aware that the proposed taxes deepens the crisis of poverty, and punishes the youth and the unemployed, more than it can reward them. Listen to this: the 8% VAT on petroleum products still means that fares will go up making it difficult to commute in search of jobs. Browsing for leisure on social media, such as facebook and twitter, and online job hunting in cyber cafes will be more expensive following the introduction of taxes on data services to the rate of 15% of excisable value.
This means the youth will pay more to stay online, for whatever reason. Similarly, the cost of MPESA transactions has nearly doubled from 12% to 20% of excisable value. This means sending money will be more expensive and the poor will have to either pay more or revert to traditional ways of sending money in sealed envelopes through relatives traveling to various destinations.
Housing Tax Illegal
The more problematic of all proposed taxes is the new housing tax to be contributed to the National Housing Development Fund. The arbitrary, compulsory and discriminatory character of the scheme makes it out rightly illegal, and only fit for recall.
Firstly, this tax is arbitrary. Although the government has the global mandate to impose taxes, it has no legitimate backing to administer any tax that enters its wildest, broadest possible imagination. The rational justification for this tax is lacking. It is not open to the government to simply imagine that people need houses, and that the only pathway to affordable housing is through taxation, without the need to for public participation.
Secondly, the compulsory nature of this tax is highly problematic. While taxes are compulsory contributions, this kind of levy, by design and intendment, should not and cannot be compulsory. This effectively removes it from what should be considered as possible “tax.” People have different approaches to home ownership, and this law, paradoxically, recognizes just that.
It proposes that home owners and those not qualified to be enrolled to the affordable housing scheme shall transfer their contributions to a pension scheme, after the lapse of 15 years contribution period. A common sense follow up question is why contribute to a fund the government recognizes you do not need?
Thirdly, this tax is both overtly and covertly discriminatory. The design of the law is to required employees and employers to contribute not more than Ksh.5000 per month towards the scheme. Contributors will then be entitled to affordable housing. The follow up question is: what happens to the many unemployed people? The right to housing is an immediate need, and if it must be implemented progressively, and by planning and design, its programmatic nature must cover every person—employed and unemployed.
The inescapable conclusion is that the government will not raise money to implement its mega-projects, and it should not force it. Unless the government wants to unnecessarily burden the people with excessive and oppressive taxes, it should suspend all development projects until such a time that it has recovered all the billions looted by its state and public officers and redirect it to development.
For now, let the government focus on alleviating extreme hunger and poverty. Can the government say with certainty and evidence, that Kenya is now food sufficient and that it has the capacity to withstand prolonged droughts?