This past week was dominated by public discourse on the imposition of 16 per cent value added tax (VAT) on petroleum products.
This past week was dominated by public discourse on the imposition of 16 per cent value added tax (VAT) on petroleum products. Following the passage of the Finance Bill, this tax was slated to come into force and did actually take effect on September 1,2018. A few weeks before the deadline though Parliament passed an amendment to the law postponing the coming into force of the increase by a further two years.
A day before the coming into force of the amendment, debate shifted to whether the amendment should actually take effect and who was to blame for the burden that would surely fall on Kenyans.
Many even went to the extent of blaming Treasury secretary Henry Rotich for ignoring the amendments that had been passed by Parliament, leave alone the reality hat those amendments were yet to be signed by the President so that they could take legal effect. Mr Rotich is not blameless on the VAT issue, but he did not ignore any law.
In the discussions, the one institution that should shoulder huge responsibility for the problem is the National Assembly. Article 94 of the Constitution gives the National Assembly powers of allocation of revenue, appropriation of funds for expenditure and oversight over how the funds are spent. They have immense powers over the national purse. No tax can be levied without their approval.
To have passed the budget of Sh3 trillion and also approved the imposition of VAT on petroleum products, it is imprudent to turn around and cry wolf. It can only mean that either Parliament is ignorant or casual about its financial and budgetary process responsibility or it has lost the powers to ensure that the Executive is efficient in how it manages the country’s finances.
Prudent management of financial resources was a key concern of the constitutional review process. Chapter 12 of the Constitution is dedicated to guidelines and systems for ensuring that public finance is managed in a responsible and accountable manner.
The system of public finance is expected to promote equity in society. Burden of taxation is accepted to eb borne by citizens but it must be a fair burden. We should, not for example over-burden future generations by incurring too much debt due to the wastage of our generation. We should use public money responsibly and prudently.
The VAT debate is an indictment of the extent to which we are living within the Constitutional edicts on public finance management and the detailed requirements of the Public Finance Management Act. There is a rule that I learnt a few years ago. It stipulates that in life one will both play and pay. You need to choose in all your dealings whether you prefer pain first and pleasure later or the reverse. This determines whether you would rather pay and then play later or first enjoy life then suffer the consequences. This adage applies to everything we do. Applied to the current situation in the country we seem to have played an are now paying dearly for our errors.
The debate is actually one about our debt burden and levels. The Media reported that in July, the country barely met its obligations and even then, we had to be aided by domestic borrowing. If true, the fact that we must borrow for our recurrent expenditure is a demonstration of a financial crisis.
This may not be something new for the discerning members of society. It has been our practices the last few years. For some reason the obligation that Government requires to meet every month is more than what it is able to raise. This has called into question the rationale of a lot of the debts that have been incurred.
Basic rules of financial management require that one lives within their means. There are signs that the country may have bitten more than it can chew. It is living beyond its means. Efforts to plug the hole are too few and in between to address the fundamental problem.
It is not possible to develop if we are almost scrapping the development budget of most agencies. The President recently put a freeze to all new projects. This may be well if it is about prudence in using resources. However, if it turns out to be just a way of plugging the gaping hole in our budget then it will not go to the core of the problem. The solution must be in reducing our wastage of public resources and cutting down on unnecessary expenses.
This is where the National Assembly must turn its attention to. And they should start by looking at the budgetary allocation to the Parliamentary Service Commission.
They have to lead by example to instill fiscal discipline and prudence in the manner we manage the country’s public finances.