Fund key sectors adequately to spur an ailing economy

The Finance Bill 2024 has elicited heated debate due to the proposed new taxes. [Getty Images]

The Finance Bill 2024 has elicited heated debate due to the proposed new taxes. Majority of Kenyans and experts warn that should it be passed as is, the economy will be hit adversely.

The Bill has also been put up for public participation beginning this week and Kenyans are expected to give their views. This offers an opportunity for mwananchi, opinion shapers, leaders from different spheres and experts to give their informed proposals.

The private sector has already sounded the alarm saying the proposed new levies and taxes would force them to lay off workers and reduce operations in Kenya. This will add salt to injury of joblessness especially among the youth.

Financial experts, including the World Bank have said the increased taxation will shrink the economy further and reduce people’s purchasing power. When the larger population cannot buy goods and services, investors and manufacturers will shy away.

Drafters of the Finance Bill 2024 must listen to all voices and make adjustments to areas that threaten economic growth. Kenya’s economy last year showed some signs of recovery from the post-election havoc and effects of the Covid-19 pandemic. That should be supported by everyone, including the government.

Agriculture was one of the sectors that supported that growth with maize farmers, coffee and tea growers enjoying a bountiful harvest in the last financial year. With the recent heavy rains and subsequent flooding, there is danger that the harvests this year could be reduced drastically.

Now, the government must raise taxes to run the country. The taxes come from farmers, business people, workers, consumers and all Kenyans seeking government services. The technocrats writing the Budget proposals know this and must balance between nudging economic growth and supporting taxpayers. When it appears the taxpayers are suffering the burden of heavy taxation, but getting little government support, resentment grows.

In the process, some people device ways of avoiding taxes and deny government revenue. Additionally, investors pull out of the country, and with it, jobs are lost. Potential investors also keep away, which stifles economic growth. The Finance Bill 2024 proposes removing Value Added Tax (VAT) exemptions on agricultural inputs such as fertilisers, pesticides, and seeds, subjecting them to the standard 16 per cent. This will reduce farmers profit margins and raise the cost of production.

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Besides eventually raising the cost of living, food security will suffer greatly from this proposal. Farmers and several leaders have raised objection to this proposal. Another example is the 35 per cent excise duty on papers used to pack tea leaves.

This has made value addition to Kenyan tea an extremely costly undertaking. Dealers in tea have moved to other countries, leaving Kenya merely exporting raw materials. This is not how to grow an ailing economy.