By Leonard Wanyama
Source: Standard Kenya/Sketch: Lunapic.com
Lately, whenever taxes are mentioned in conversation, a good portion of the time is taken to offer each other a shoulder to lean on among other forms of psychosocial support.
This is because mere mention of the Kenya Revenue Authority (KRA) actions unleashes a barrage of emotions with every single person having something to say about how paralyzing current measures are.
Even school children are beginning to write poems about how troublesome taxes have become. Also, there is glaring behavioral change as individuals try to stretch their shillings and cents.
You may have noticed shopkeepers aggressively asking you to avoid paying using till numbers because they prefer you send cash to their personal lines.
Maybe you’ve also noticed that Kenyan sensibilities of being offered free bags or packaging as an after-sales service have now since long gone because it costs too much for traders.
Consequently, the tax burden is reducing productivity and lowering consumption. Fewer jobs mean less people to tax and minimal consumption means that the economy will contract further because uptake of business wares or services is decreasing.
Most pundits have been trying to explain this pain using the Laffer Curve theory that describes the relationship between tax rates and the amount of revenue collected by governments.
Present discomfort, to them, is illustrative of how the current administration is pushing the limits of revenue collection to the breaking point because higher tax rates result in lower revenues.
This is because the promise of expanding tax bases that would have reduced rates due to a wider revenue resource pool, have been replaced with higher tax rates squeezing every cent possible out of people’s pockets despite no increased incomes in the context of a sluggish economy.
Accordingly, this therefore beats the purpose of self-financing the country’s service delivery thereby showing why the government keeps resorting to debt acquisition that is part of punishing expenditures locking the country in an almost fruitless cycle like the cursed King Sisyphus of Ephyra in Greek mythology.
Yet, while indeed KRA has missed its targets, the fact that its revenues have grown by KES 45.3 billion confirms that Kenya does not have a tax collection problem but mostly a public expenditure challenge.
Listening to the Controller of Budget, Dr Margaret Nyakango, at the National Dialogue Committee it is very clear that across government – be it the executive, the judiciary, or the legislature- there is a problem of moral hazard in how public finances are managed.
Basically, this means that in decision making or implementation various officials and institutions engage in risky behavior that is not in the public interest because they bear no risk for the economic consequences of their actions.
This systemic bad faith therefore explains how KRA officers can begin to harass passengers at airports without thinking of implications to tourism or why the Energy and Petroleum Regulatory Authority (EPRA) can disregard a court order suspending implementation of the Finance Act 2023.
It explains why duty bearers may not realize that costly mobile money transaction fees on account of taxation hinder essential services and even jeopardize government digital services by discouraging citizens from using them.
Multiple extraction of funds from people’s purses that do not correspond to the services available to them then begins to break the social contract between the individual and the state.
Government cannot continue to spend beyond its means. Tax governance efforts, that is, prevention of avoidance and evasion of taxes should consider a civic education approach to support ongoing capacity building efforts.
This is so that even as current efforts develop new knowledge, improve skills, change existing bad practices, and inform policy makers, there is greater personal awareness plus responsibility for socio-economic implications of tax actions.
The author is Regional Coordinator of the East African Tax and Governance Network (EATGN). Follow on X @lennwanyama.
