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  • Writer's pictureIrungu Houghton

Why must we over-borrow, overspend, then tax Kenyans more?

A second round of Rutonomics has begun to play out as we approach Budget Day 2024. Today is day ten of several stakeholder submissions on the estimated 2024/25 budget and the 2024 Finance Bill. The submissions make it clear who the winners and losers might be, if the proposed Bill goes forward in its current form.

 

At their simplest level, national public budgets are like our own personal income and expenses. Rather than balancing them, sound personal finance prioritizes what’s important to us, requires us to save and invest in opportunities to make more money. Albeit with thousands of variables, the Treasury mandarins along Harambee avenue play the same game. Their choices, however, directly affect all our pockets.

 

This year’s Finance Bill looks set to be as controversial as the last. Several citizens, finance experts, civic and business agencies are already sharing their views. Sadly, the comprehensive analysis of the Okoa Uchumi Alliance, International Budget Partnership and others do not inspire hope.

 

Bizarrely, the introduction of 2.5 percent taxes on motor vehicles will lead to vehicles worth Sh 4 million and above attracting less tax compared to cars bought at Sh 200,000. That is, unless the measure is to sweeten the deal for guzzlers bought by MPs with loans paid by taxpayers? This measure has been roundly rejected with alternative proposals by the Kenya Private Sector Alliance, financial and legal service agencies like KPMG, Deloitte and Bowmans.

 

Introducing VAT on ordinary bread and dairy products will raise the cost of living for most households. Mandatory eTIMS requirements and steep penalties will increase the cost of doing business for all hustlers. Excise on telephone and internet data services will shrink the growing digital economy and widen the digital divide. Taxes on foreign exchange and money transfer services will discourage the 500,000 strong diaspora who currently contribute Sh 667 billion in foreign exchange from remitting. These measures, the 0.5 per cent tax increase on all imports, reintroducing taxes on plastic recycling machinery and eco-levies on digital devices that have a negative environmental impact seem to hang in the air without a clear public policy framework or incentives.

 

Even more worrying, the bill proposes a blanket exemption for the Kenya Revenue Authority from the provisions of the Data Protection Act (2019). Should this go through, KRA and other authorities will be empowered without any safeguards, to access, assess and collect taxes as well as share our personal, business, and financial data in ways never seen before. The proposal is classic “big brother” surveillance and shatters our constitutional right to privacy under Article 24. Only China has such a scheme.

 

Sadly, the pain of being “skinned alive” as some have described it, does not come with the promise of increased quality essential services, less corruption and more good governance. The 2024/25 Budget of Sh 3 trillion prioritises foreign creditors over Kenyan citizens, further defunds the 47 counties and proposes major cuts to the delivery of the bill of rights.

 

Students will have less school meals, women entrepreneurs less start up capital, children with disabilities fewer funds for special needs education and pregnant mothers’ fewer maternity services. With national government intrusively raiding housing and health functions constitutionally assigned to county governments, devolution seems set for another round of deliberate defunding. Despite acute droughts and floods, it is perplexing that the agriculture and disaster management dockets seem set for 21 to 50 per cent budgetary cuts respectively. If annually, Kenya loses Sh 608 billion (7.8 per cent of GDP) to corruption and other human rights abuses, is it prudent to slash the budgets of the Auditor General, EACC, IPOA and the KNCHR among others?

 

The 2023/4 Finance Bill proposes to spend 23 per cent of our taxes on 42 foreign creditors and 55 per cent on 56 million Kenyans. If, as Article 203 (1) of the Constitution argues, the national interest should take precedence, can Kenyans not challenge this twelve-year-old model of over borrow, spend hard and then tax even harder? Alternatives exist.

 

This opinion was also published in the Saturday Standard,  8 June 2024

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