Tracking societal inequality via fiscal justice

A slum in Nairobi. The gap between rich and poor is increasing. FILE PHOTO | NMG
A slum in Nairobi. The gap between rich and poor is increasing. FILE PHOTO | NMG 

In 2017, an Oxfam study, ‘‘An Economy for the 99 per cent’’, found that just eight men owned the same wealth as the poorest half of the world (approximately 3.6 billion people).

According to Oxfam, the very design of our economies and the principles of our economics have taken us to this extreme, unsustainable and unjust point.

The study identified that alongside accountable and visionary government, businesses that work in the interests of workers and producers, a valued environment, and women’s rights, a strong system of fair taxation is central to a more human economy.

Fiscal justice, progressive taxation to redistribute and raise revenue for essential public services, is vital to tackling inequality.

According to a study recently published by Oxfam in Kenya titled ‘‘Taxing for a More Equal Kenya’’, taxation directly reduces post-tax inequality levels and strengthens the social contract.

However, for fiscal policy to be truly effective in reducing inequality, it should ensure progressive taxation redistributes at the point of collection and when spent on inequality-reducing public services.

By taxing effectively, income and wealth can be redistributed whilst raising much needed revenue to invest in healthcare, education and sanitation.

The gap between rich and poor is increasing. Efforts to address inequality by introducing progressive tax systems, lower income earner reliefs and tax credits for the poor are counteracted by the wealthy adopting aggressive tax avoidance schemes that result in decreased taxable revenue in their country of operation.

As a result, revenue is redirected to offshore jurisdictions, where little or no economic activity takes place, and stored away with no repercussions.

The recently released Paradise Papers illustrate the ways in which high net worth individuals and mega corporates exploit the gaps and loopholes in national tax and regulatory systems to avoid paying their fair share of tax on their investments.

The wealth of information released by the International Consortium of Investigative Journalists (ICIJ) in the last five years, justifies increased financial transparency and a reform of national tax systems.

The Constitution of Kenya holds the promise of various economic and social rights including the right to education, the highest attainable standard of health and reasonable standards of sanitation.

Mobilizing tax revenues can facilitate the attainment of these rights and, consequently, combat inequality.

Extreme inequality is not inevitable and Kenya must fight inequality to reduce poverty, sustain economic growth and bring the country together.

Joy Ndubai is Tax dialogue programme officer, Oxfam Kenya.