Tuesday, 28 January 2014

Bizarre Taxes Only in Kenya: Public Finance a Headache for County Governments

Inequality has been criticized as the foundation of recurrent conflicts in the world today more so in Africa. Few people hold on to so much wealth leaving rest of the population wallowing in poverty.According to a seminal report by Society for International Development, Pulling Apart: Facts and Figures on Inequality in Kenya, there is now a gulf between the poor and the rich, a gap that makes Kenya the third most unequal State in Africa. Moreover, this divide entails differences in access to basic social goods and service such as education, health, access and enjoyment of political rights and freedoms.

To this end, attempts have been made to remedy the worlds increasing levels of inequality but little has been achieved to date. Devolution was proliferated as a one-time dose for inequality in Kenya. Everyone was in agreement that in order to have equitable development in the country, we needed to change the laws. Settled, the constitution was changed. The promulgation of the constitution marked a new era in the development agenda in the country. However, what everybody seemed to have forgotten was the cost of devolution. Three years after ushering the new laws, the country is now grappling with a bloating public wage bill courtesy of devolution.

In the past one week or so, we have witnessed a number of protests by the public in various counties across the country; Murang’a, Kiambu, Meru, Machakos, Busia and Machakos. At the epicenter of the contention, is an attempt by the county governments to increase taxes in a bid to raise more revenue to foot the ever increasing expenditure in administration and social services. Kenya is still among the top five countries in the world where the citizens are highly taxed. Ironically, there is little to show for it yet billions of shillings are collected to fund various development projects. So when the county governments decided to have additional taxes and increase the existing ones, it was expected that the public wouldn’t take it lying down.

What interests one in this craze and hullabaloo of taxes by the county governments is the object/subject of taxation which could only be termed as bizzare. In Kakamega County for instance, the county government is proposing to impose tax on chicken being kept within the town. Yes! That’s right chicken tax. As if that wasn’t outrageous enough, county government of Busia decided to tax the dead. The regional government has proposed that anyone who goes to the morgue to see a dead relative or friend or any other person of interest will be required to pay Ksh.200 per visit. What the hell?

The ludicrous taxes portray lack of creativity, innovation and most importantly expertise in public finance. The taxes have not only faced opposition owing to their unusual nature but also because of failure to undertake wide consultations before drafting the financial laws. The chiefs of finance seem to have reached the end of thinking when it comes to raising revenue for their government. Unfortunately, more than half of the revenue that is collected and that they strive to collect through the proposed despicable taxes is channeled to recurrent expenditure and consequently, development projects are not funded.

Government programs should be designed to maximize social benefits and the revenues required to pay for those expenditures should be raised through taxation systems that creates the fewest efficiency losses caused by distortion of economic activity as possible. From the foregoing, it is imperative for county governments to ensure that they offer value for the residents first before they demand for more tax. Similarly important is the synchronization of the local taxes with those being imposed by the national government so that there are no conflicts and tax burden for the citizens. In addition to that, focus should shift from taxation to creation of investment opportunities in their jurisdictions and the spotlight should be directed to establishment of industries. Industrialization will spur growth as more people will be involved in gainful employment and thus be able to pay taxes that facilitate the development projects in the country. Empowering residents of the counties by creating conducive environment for business and living should be the key schema for the county governments.