Kenya Kwanza has broken tax, borrowing promises

Loans and taxes were some of the biggest issues that underpinned the debate during last year’s election campaigns.

Kenya Kwanza leaders promised not to take loans, yet now that they in government, they borrowing is out of this world.

They said they will not increase taxes, yet they are now raiding the mama mbogas while ironically considering the reduction of corporate tax.

Most people voted for the hustler government believing it will lift up mtu wa chini, but today the reality reads like dramatic irony in Shakespeare’s Hamlet. A few watu wa juu are burning billions globe-trotting.

Public debt rose by a record Sh1.56 trillion ($10.8 billion) in the last financial year to Sh10.1 trillion ($70.75 billion). The shilling has hit rock bottom against the dollar with a depreciation rate of 18.9 per cent, a situation that puts a serious strain on external debt servicing.

A few months ago the President promised a favourable exchange rate and alluded to a deal that would make fuel cheap. It turns out the deal landed us in a conundrum that no one seems to explain clearly.
Well, someone tell the chief economic advisor the strategies are not working.

Take fuel prices for instance. We are locked in this G2G arrangement which is punitive and disadvantageous to Kenyans at a time when the crude oil prices have gone down by almost USD 25.

A few years ago, when President Uhuru Kenyatta intended to have VAT on fuel at 16 per cent and the outcry led an eight per cent compromise, the cost per barrel was USD 114 and he left office when the cost per litre was at Sh159 for petrol, Sh140 for diesel and Sh127 for kerosene. Today the cost per barrel is USD 90 and petrol has hit an all-time high of Sh213 with the hustlers’ kerosine at Sh202.

If what the handshake government spent on subsidies went to oil marketers and cartels as we were meant to believe, then now that they are not there why should a hustler in Suna East who depends on paraffin for her children to do homework at night suffer exorbitant costs of kerosene?

Well, let us for once forget that the President eloquently talked about addressing the fuel taxes, which not stands at Sh79, in the presidential debate and assume that the high taxes on fuel and our payslips will give his government the revenue to change lives of Kenyans. Why then are we still borrowing in record amounts which seem to be exacerbating what we are intending to cure with the punitive taxes?

You see, increasing taxes has what economists call marginal diminishing returns. Simply put, you tax more and instead of getting more revenues, the people spend less, meaning stunted or even diminishing overall revenue growth.

To put that into perspective, the 14-seater matatus are likely to close shop due to high cost of operations as more people will resort to walking, supermarkets will sell less and even lay off workers, most Kenyans are going to stop driving and probably work from home. All these will reduce spending.

The money that the government intends to collect will not be realised and the Treasury CS has already spoken of not only dire days ahead but a fall in revenue collection. Not strange. In the grand scheme of things, life getting better is a mirage.

We hope things become better for the good of Kenyans. Sadly, if they don’t, the folks at the bottom of the pyramid will feel it more and transfer it to the salaried folks who are increasingly facing the double brunt of increased taxes on their payslips and demands from struggling relatives, friends and neighbours.

Unless bottom-up means getting money from the bottom and funding the glob-trotting of the folks at the top, this regime needs to go back to basics and address cost of living problems of the real hustlers. Kenyans regardless of economic status are struggling and worse for the very hustlers who voted for Kenya Kwanza.
— The writer is a PhD candidate in political communication