Opinion and Analysis
Kenyans should embrace culture of paying taxes
Posted Tuesday, June 26 2012 at 19:30
My interpretation of the Budget is that it focused mainly on methods of boosting tax collection, including removal of loopholes that have persisted for many years.
But before I proceed, I wish to comment on how well Finance minister Njeru Githae seems to have settled in his new job.
He appears good at balancing politics and business, a strategy that is essential in a country like Kenya which has diverse vested interests, and at a time when political volatility is high.
Mr Githae was able to put across difficult and controversial messages in a simple and mostly agreeable style. The Budget had a litany of expensive constitutional requirements to be funded.
The new commitments are essential if the new Constitution is to give us the changes we asked for. At the same time, funding of ongoing infrastructure projects is essential if we must realise short and medium term development goals.
Mr Githae had limited options but to finance the requirements through Budget deficits. It is for us Kenyans (not necessarily donors) to finance these costs, and hence the emphasis of this year’s Budget is on enhanced effectiveness in tax collection.
It is not impossible to re-engineer the miracles performed by the Kenya Revenue Authority (KRA) in 2003/04 when tax revenues were substantially increased, reducing reliance on donor funding.
Except for captive employees on payrolls, many Kenyans do not feel obligated to pay taxes. Kenyans should learn to see paying of tax as an honourable obligation.
There should be a culture change. Such a change should be demonstrated by State and public officials, including politicians.
It all starts with the government assuring Kenyans that if they pay taxes, public finance accounting systems would ensure that wastage and theft are dealt with.
In the 1980s and 1990s, Kenyans felt bitter about misuse of their taxes. This was justified. First, the tax rate was punitive at 65 per cent, today it is 30 per cent.
Secondly, a large fraction of tax revenues was siphoned out of the country by individuals. Some of the debt financing in the Budget, I am sure, goes to paying old loans which may have been corruptly diverted.
Recent media reports indicate that past stolen monies are stashed away in Swiss banks.
Payment of taxes on personal and business incomes, including earnings from rent, is mandatory.
However, now that the government has decided to turn focus on rent income, KRA may wish to consider giving amnesty on omissions committed prior to December 2012 so that landlords can come out in the open and pay taxes.