It will be moronic to imagine the tax-raising measures and proposals in the Finance Bill 2024/2025 will be withered down just to appease Kenyans; enraged as they are.
Even with experts appearing before the Finance Committee in person and more through correspondence, I can predict that the scenes witnessed in 2023/2024 budget cycle will reoccur. The process of preparing a budget is too engaging for one to believe the tax proposals exist either by error of judgment or a stop-gap measure preceding public participation.
What is being witnessed in the Finance Bill of 2024/2025 is a manifestation of what has been expressed by the government as far as its real intent on tax targets, is concerned. Not once has President Ruto been heard making comparisons on the tax-to-GDP ratio to other countries, insinuating that Kenya has a lot to catch up to do.
As late as during his recent state visit to the US and while addressing a group of students from Harvard Business School, he reiterated that Kenya’s tax-to-GDP ratio of 14 per cent is too low and is deliberately pushing it up. He aims to achieve a ratio of 22 per cent by the end of his first term in office. So everything in the Finance Bill is deliberate and has a target.
There are two options for achieving higher taxes. One is to make sure everyone supposed to pay, does so. The second option, which seems a low hanging fruit, is to keep increasing taxes for those already in the tax bracket.
However, none helps the country if the real economy is not growing because taxes are percentages, and so the higher the values, the higher the return.
Memories of the 2023–2024 budget cycle are still fresh from the battle that raged over the Housing Levy. Amid the hue and cry, the Parliamentary Committee on Finance and Planning found a clever way to morph it from a levy to a tax.
The battle went to court, courtesy of the Omtatas and the Gikenyis of this world, but the government was still adamant that it must get some money from employees and employers.
From the time the stakeholders in the budget-writing process started consolidating the document, they knew what they were doing and how much they planned to raise to fund the 2024–2025 budget. However, it is possible that a few clauses, like the one on bread, were thrown in to divert attention from some harmless-looking measures with a bigger impact.
The Echo Levy, for instance, cuts across a broad spectrum of daily goods and services. From tires to normal plastic buckets and containers. From ATM cards to packaging materials, to feign a spirit of give and take, the final report of the Finance Committee will give in on bread, make slight adjustments on the rest of the contentious issues, and that is it.
The drafters of the budget expected all the reactions and prepared their shock absorbers because the end must be achieved by force or fire.
The writer is anchor Radio Maisha
