Treasury secretary Henry Rotich’s 2018/2019 budget proposals are like no other since Independence. Although his intentions were to stimulate manufacturing and create jobs, he may have inadvertently put himself in a corner where labour unions and the poor will use him as a punching bag.
Perhaps he needed data to decide what to tax. Not too long ago, Kenyans took to the streets seeking affordable unga (flour) to which the government responded with subsidies. In the past month, farmers in North Rift were on the streets protesting against unknown people who have flooded the local market with cheap foreign maize leaving farmers to suffer with huge inventory.
Corruption allegations at the National Cereals and Produce Board are yet to be resolved. There is no logic in undermining farmers then asking them to tighten their belts and pay tax. They will have no option but to protest in the streets as they have done in the past month.
We have not recovered from the recent protracted labour disputes that disrupted health and educational services in the country. With these new tax measures, we have effectively handed them a genuine excuse for going back to the streets to demand for more money. Taxing essential goods impacts on the poor and it may turn out to be counterproductive as it provokes them to protest.
It is also not wise to tax some services like mobile money, which is playing a huge role in potentially formalising our huge informal sector. The bulk of mobile money users are the poor. The discovery of mobile money has been hailed world over as a tool for inclusivity. It is also only channel for removing money from under the mattresses into circulation. It has become the premier gateway to banking for majority of the poor.
It is through this platform that they receive their salaries. Mobile money is also increasingly becoming the lens through which the tax authorities can have traceability of receipts and expenditure of individuals. Mobile money services data have the potential to bring more revenue to government if a policy to make the country a cashless economy is put in place.
Greater data analytics and traceability of incomes and expenditure will improve tax compliance and help government to measure the size of the economy. As we move into the fourth industrial revolution, big data is one of the technologies that will define it.
It means that instead of the regular Auditor- General reports that tell us what has happened, they will shift to predicting the occurrence of public money theft and stopping it. It is what Kenyans need to have confidence that tax proposals will indeed benefit mwananchi.
Mr Rotich’s desperate tax measures were largely dictated by gross inefficiency by government in resource utilisation.
It is why the President ordered for open tendering methods to minimise wasteful corruption. According to media reports, this country loses a third of its budget to corruption. In a budget of Sh3 trillion that means Sh1 trillion is lost.
The minister should have told us how much he expects to raise by defending against corruption and through recovery of stolen assets. More needs to be done to improve efficiency in resource utilisation.
For a start, we need a quick policy on data similar to the European Union’s General Data Protection Regulations (GDPRS) to enable the state to legally obtain data from banks, mobile money services and other agencies for analytics to seal revenue leaks from the government.
There is more revenue that the Treasury can raise from prudent use of data than taxing mama mbogas (vegetable vendors) where it will be expensive to collect any form of tax. They are the last mile of the food supply chain and taxing them will see the price of food unnecessarily skyrocket.
Inflation will also be pushed to the roof and eventually reduce consumer purchasing power.
While some economists may argue that this is one item in the basket of goods and services consumed by households, they need to know that food accounts for 45 per cent of the household income in the majority bottom of the pyramid. In the same basket will be kerosene, cooking oil, and transportation all of which were affected by tax increases.