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NEWS & CURRENT AFFAIRS

The Nairobian

Find other means of generating revenue instead of raising taxes

Michael Ndonye

By Michael Ndonye | Jun 21, 2024

**Protestors walk on the streets of Kisumu to demand the suspension of the Finance Bill.** [Michael Mute, Standard]

Kenyan leaders, let us reason together on this matter. Two years after the Kenya Kwanza government was sworn in, an entirely new generation is on the streets, demonstrating against the ever-rising taxes and, ultimately, the skyrocketing cost of living.

This is the first time we have a break from politician-planned to people-planned demos. The demos followed a public outcry that forced the government to amend the controversial Finance Bill 2024 in which it removed the proposed 16 per cent VAT on bread, transportation of sugar of cane, financial services, foreign exchange transactions as well as the 2.5 per cent Motor Vehicle Tax. Notwithstanding, the aggressiveness with which the Kenya Kwanza government approaches taxation makes it seem like this is the only way for the government to generate revenue.

Does the government have innovative and creative ways of generating revenue other than through tax collection? A story is told of a CEO in the United States who called his executives and heads of departments and instructed every department to come up with ways of generating extra revenue if at all they wanted to have their jobs secured. They were given a deadline of two months to make their submissions.

Most executives and departmental heads were hesitant as they rationalised that resource mobilisation and marketing departments existed to do such work. However, they were caught between a rock and a hard place. After two months or so, all departments started generating some portion of revenue autonomously. The pressure from their CEO unearthed creative and innovative ways never seen before the Covid-19 pandemic. All governments work like that.

The President and the executive usually push the departments in every ministry to find ways of generating revenue for the government to run its projects. What happens when the people there are not competent? They duplicate solutions! Seemingly, taxation is the furthest the people in charge of government departments and organs can see. Can there be other ways for the government to generate revenue? Kenya has many resources lying idle, including swathes of fenced lands awaiting grabbing. In government parastatals and state organs, there are resources worth billions that are left idle—like rotting machinery and abandoned furniture. The government organs have ghost workers and idle civil servants who earn salaries adding up to billions but produce nothing.

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Robert Kiyosaki’s book, 'Rich Dad, Poor Dad', would classify Kenya as a country with no financial literacy. The biggest lesson the government can learn from Kiyosaki's book is that we have liabilities in the form of parastatals, government organs, and institutions that are run using taxpayers' money but are not generating any cash flow for their sustainability. For instance, the government owns less than 50 per cent of Kenya Airways's shares. Why does the Treasury pump billions into KQ as advance loans and old debt write-offs as if it were a parastatal? KQ is an example of many public-private partnerships in which the government pumps taxpayer's money unprocedurally.

Why not start by sealing loopholes in government to save revenue for government operations? When the Kenya Kwanza government came into power, it planned to privatise the Kenyatta International Convention Centre and other state corporations to ensure more revenue was generated from government resources turned liabilities. That was a brilliant move. Did it happen? If it did, how much revenue was generated, and how did it cushion taxpayers? Kenya has many resources, but they are mismanaged. Taxation is a liability to the people and should be the last option.

Over-taxation impoverishes citizens, wrecks businesses and commerce, and throttles development. With over-taxation, investment is difficult—a country where trade is unfriendly to global investors has a grey future in production. In a few years, when the small and medium enterprises clash, the government will gridlock, and everyone will suffer. But if the government empowers people to generate wealth, institutions such as insurance, banks, manufacturing, and the service industry will revive and sustain the economy.

Dr Ndonye is a senior lecturer at Kabarak University’s Department of Mass Communication