High tax burden but little promise of reciprocal services
The howls of pain, anger and frustration triggered by the savage tax raid on hapless Kenyans are understandable but will not change the fact that President William Ruto’s government must continue borrowing and taxing Kenyans even more harshly to raise money to pay the debt the government is servicing, fund its operations and leave a little surplus for whatever development that may be possible.
This is the moment of realpolitik. What we heard from candidate Ruto for many months leading to the August 2022 election were the seductive lies that politicians will tell to get votes. Now he has to govern and the reality is what it is – he must find money from somewhere to fund government operations.
So, if we thought that a 30 per cent Pay As You Earn tax was extreme given the terrible services that the public receives from the government, earners of Sh500,000 and above will now surrender an extra five per cent. But those earning this level of income are very few indeed – mainly top executives in the corporate sector.
The pain for the rest of the earners remains the same: Earners of up to Sh24,000 still pay 10 per cent as tax; 25 per cent tax on the next Sh8,333 and 30 per cent for those earning Sh32,333 up to Sh499,999. Above that the 35 per cent tax will now kick in. Cynics will argue that those earning at this level should not complain too much but that would be unfair because they still bear a proportionately higher rate of taxation because of their lifestyles.
The other tough measures include an increase in the controversial turnover tax from one per cent to 3 per cent and an alteration of the eligible band from businesses with a turnover of between Sh500,000 and Sh15 million. Originally, it was imposed on those turning over between Sh1 million and Sh50 million.
The target is clear; small and medium-sized enterprises. This is somewhat counter-intuitive coming from a government that has styled itself as zealously pro-hustler and SMEs!
The government also wants to take three per cent of your salary, and complement it with another three per cent from your employer and save the total for you in a fund to be called the National Housing Development Fund.
It is not clear how this six per cent of your monthly salary will add up to a house that you want to live in, or how it will be managed to ensure that houses will be available when you exit employment.
Not holding breath
But these are questions the government is not interested in answering now. On his own admission, the process must never be a blocker to achieving a desired objective.
The plan sounds like the 100,000-houses-a-year objective that the Uhuru-Ruto government did not attain. It has been resurrected and indeed we have seen launches in Kiambu, Homa Bay and Nairobi counties. Kenyans are eager it succeeds, but the same Kenyans are not holding their breath.
Marketing services and digital content services will be subject to withholding tax. Ironically, this is the one area that the President extols as holding huge employment promise to our youth. So why is he in a hurry to slap a 15 per cent WHT on the same?
The list of distress goes on and the energy to tax will not abate. The harbinger of even tougher times is the plan to empower the tax authority to demand the remittance of excise duty paid within 24 hours of the transaction. These guys are not going to be bothered with big headache items for businesses like cash-flow management. Most businesses will principally be working to pay taxes!
Not that there is anything wrong with paying taxes. It is a responsibility that most citizens are proud to shoulder but it imposes a reciprocal burden on governments to use the tax prudently for the benefit of wananchi.
It is not expected that a country with as high a tax rate as 34.2 per cent of all commercial profits, and a very high PAYE, should have its infrastructure and other systems as shabbily maintained or managed as ours are. People die of hunger when there is drought and suffer severe discomfort when it rains like it is doing currently.
If it is not roads being closed because of dangerous cracks, it is drainage systems being blocked causing dangerous floods in urban areas. Security is a shambles, corruption an unrelenting rash that festers deeper by the day and feeds off our taxes like a ravenous crow. It is like Kenyans do not pay taxes!
Kenyans of course will pay the taxes because they must. But the President that promised so much that will never be delivered, can at least make the taxes do more than merely pay debt, and underwrite theft and corruption. BY DAILY NATION
Post a Comment