Resolve dispute on tax measures early

Monday, May 29th, 2023 07:41 | By
Photo illustration of tax.
Photo illustration of tax. PHOTO/Internet.

Without a doubt, there is a veritable difference between the tax measures that the government has proposed on the one hand and, on the other, what citizens are able or willing to pay. This disconnect ought to be resolved within the next two weeks so that by the time the Cabinet Secretary for the National Treasury presents the Finance Bill in the National Assembly, the government’s plan can be aligned with the will of the people.

Kenya finds itself in unchartered waters. For probably the first time in its Budget-making history, the public has invested a great deal of interest — and scrutiny — in the taxation measures. This ought to have been the tradition but this time round, there is a high octane involvement because Kenyans are afraid that if passed as is, the Finance Bill will reduce their incomes significantly.

Among the most contentious issue has been the Housing Fund Levy, which the government wants to tax at three per cent of income and cap at Sh2,500 for every worker employed in the informal sector. This has become a major bone of contention and has stirred discontentment despite government efforts to explain that the money will be used to spur job growth through the construction sector, one of the few that is labour incentive. However, it has failed to explain the benefits to those who will suffer the deductions, instead saying that this is one way for those in employment to cushion those who are not.

This, by itself, is not sufficient as the public, by its very nature, is not altruistic. Every deduction must serve a good that has a benefit to the taxpayer and with the housing fund, this benefit is not clear. As a result, it is likely to stir even more disquiet if the Finance Bill is passed.

Rather than suffer this greater pain down the road, it would be more prudent for the government to address the issue now and adopt either of two options; win public support for the deduction or shelve it for a later date. Unless this is done, there is a risk that legislators who pass it will fall out of favour with the electorate and this will affect their political careers going forward.

That is why the government should take all due care to ensure it does not inflict pain on either the legislators or the electorate given that it has a two-week window within which to craft a win-win formula or drop contentious tax measures to pave way for more public education. Voices of reason need to emerge, but going to court is not a remedy because it risks stalling the entire budget process to the detriment of the entire country.

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