Are we spending too much time paying taxes?

By Nikhil Hira

“The men who collect taxes are working in one of the oldest professions known. Archaeological evidence dating from 1900 BC includes a clay tablet recording a tax for public works and a papyrus scroll which reveals that even 4,000 years ago, taxpayers had some complaints.” – Optimist Magazine

So, dear taxpayer, as you can see nothing much has changed over the years! Indeed even in the 21st century, Kenyans are complaining about their taxes and how high they are.  Of course, as I have said before, our top rate of income tax at 30 per cent is in fact relatively low when compared to other parts of the world. 

The issue is that you reach that rate at a relatively low level of income, giving the perception (possibly rightly so) that you are over taxed.  Add that to the lack of services we receive for our tax shillings and you can understand why we complain so much.

The chart (effective rates) clearly shows that our effective tax rates are not that high. But how long do you spend actually working to pay tax and where does it all go?  In the more developed economies, many of which have higher effective tax rates than us, one could spend as many as 70 days a year effectively to fund Government revenues and expenditure. A frightening thought! 

We did our own analysis here and I am happy to report that we spend less time on such mundane matters as funding Government – a mere 21 days in fact.  Basically in an average of 40 hours week, a person earning Sh100,000 per month spends nine hours and 45 minutes to meet his tax liability. 

I am only talking about direct taxes – that is the income tax one pays more often than not through the Payesystem. A staggering 25 per cent, which only equates to rate of direct tax. No wonder people complain!

But where does all this money go?  Well it is not simply a case of looking at budgeted expenditure and proportionately computing it, but for the purpose of this discussion that is what I have done.

It is interesting that in terms of time for any given week, in excess of 75 minutes of your time goes to the Government paying off its debt, and that is just the principal. A further 42.5 minutes goes in paying the interest on the debt!  Energy, infrastructure and ICT account for 75 minutes and education 96 minutes, which we shouldn’t begrudge.  But as far as agriculture, the backbone of our economy is concerned, you only devote 19 minutes of your time to it. Perhaps a reallocation is needed.  Incidentally, in this financial year, you will be spending 70 minutes a week funding county governments. We don’t really spend enough on national security, which takes a mere 26 minutes.

Of course, with all the noise we have been hearing about raising taxes in the budget, you may just find that we fast approach the 70 days a year funding our Government.  And lest you forget, the two agencies that redistribute great fortunes are taxation and offspring.