High taxes ironic when we can’t account for billions lost to graft

Activist Boniface Mwangi during an interview with The Standard on Friday, July 2, 2021 [David Njaaga, Standard]

Activist Boniface Mwangi’s latest mistreatment at the hands of “tax collectors” is just one of several episodes that threaten to be a hot-button issue. Challenging a gang of mask-wearing men, led by a gun-toting policeman, to identify themselves, he was met with obstinate belligerence and eventually wrestled to the ground, sustaining bruises in the process.

The Kenya Police Service denied that undue force was used. But footage from CCTV cameras repudiates their pat explanations even as small business owners attest to what has now become the norm in Nairobi. It seems business premises within the environs of the city have become magnets for various government agencies ostensibly looking for evidence of compliance with onerous licensing requirements. If it isn’t Kenya Revenue Authority officers demanding access to ETR machines, it is county government employees pressing for various business permits, some of which appear to have been conjured on the go.

A social media commentator claimed to have had his container forfeited to the KRA ostensibly for undervaluing his goods. This, he claims, is even after providing supporting documents and paying all taxes and fees. Another claimed computer and phone repair technicians were being arrested and threatened with handling stolen goods unless they paid a bribe to secure their freedom. Yet another averred that he had had his staff arrested for lack of a wall-branding license even as his colleague decried the arbitrary seizure of her weighing scales for not conforming to newly released county government guidelines.

Bur revenue collection need not be a cause of dysphoria in the citizenry. Money flows where it is trusted. Indeed, a government that delivers is not only trusted but supported by tax-paying citizens as their civic duty. In jurisdictions where there is proportionality between collection and quality public services, tax compliance is close to 100 per cent.

And therein lies the problem. A government that has failed in exercising its fiscal responsibility to citizens expects them to honour their tax obligations. How can they when, according to reports, a third of the country’s budget is lost to corruption. How can the government be trusted when, by its own admission, it loses Sh2 billion daily to theft? Why should the rank and file pay revenues that find their way to numbered accounts in tax havens overseas even as public schools and hospitals operate from decrepit hovels?

A few months ago, violent protests erupted in Bogota, Cali and other cities in Columbia. The cause was proposed reforms to the South American country’s tax system, which would have lifted taxes from salaries and dividends to fossil fuels and much more. Yet this incendiary backdrop is uncannily similar to Kenya’s where taxes are now the low hanging fruit that are proposed to alleviate the fiscal woes arising from economic mismanagement.

Sample this: Petroleum products, previously zero rated for Value Added Tax, have seen VAT levied on them, initially, at eight per cent, currently at 16 per cent. Other taxes on the same include the Petroleum Development Levy, initially intended to cushion consumers from fluctuating global oil prices but that lately has been put to other purposes.

Then there is the proposed National Hospital Insurance Fund levy of Sh6,000 for every Kenyan above 18 years. The public health sector can hardly account for billions of shillings lost through graft and yet expects that the public will continue to be squeezed for more. 

No one in their sane minds would wish for the sort of violent protests that broke out in Colombia. But the prudent should see it as a cautionary tale of what could happen when people are faced with the real possibility of having even more of their hard-earned money withheld from them.

Authorities in Kenya should heed the words of former British Prime Minister Winston Churchill, who said: “We contend that for a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself by the handle.” 

-The writer is a public policy analyst