Who will protect interests of Kenyans?

Last Thursday, the National Assembly approved proposals from the President to amend the Finance Bill, 2018 and with it introduce new taxation measures. The process, though, was not without drama.

This column argued earlier that the financial troubles the country finds itself in were caused by the failure by the National Assembly to deal with its constitutional responsibilities. When the President rejected the Bill from the National Assembly proposing that VAT on petroleum products that had been set earlier at 16 per cent be scrapped, he confirmed this accusation on MPs, stating that they were playing smart politics and not being honest with citizens.

He asserted that having listened to the cries of Kenyans he would try to balance the short-term pain with long-term gain. This was the basis of his proposal to reduce the percentage of VAT on petroleum products from 16 to eight per cent. On the face of it, the President seemed to have met the MPs half-way. However, as the saying goes the devil is normally in the details. The President’s memorandum included other hidden taxation proposals, amongst them a housing development fund tax, excise duty on telephone and internet data services and excise duty on money transfer services. In the end, the reduction was compensated for by these increases. It ended up being a zero-sum game. In essence, the projected revenue had to be raised one way or the other.

From the above actions, several issues require to be dealt with if we are to get out of our current mess. The President’s memorandum, amongst other things, blamed our problem on the 2010 Constitution and the new offices created. Others disagree. What is important though is not which side of this debate one is. It is important that the debate be conducted robustly, objectively and conclusively.

A few years ago, the budget Committee of the National Assembly led a process of undertaking a socio-economic audit of the Constitution. It is time to retrieve that report and use it as the basis of having this national conversation. We have to be ruthless and futuristic in our debate and be willing to make the required adjustments if necessary. Part of that debate must involve rationalisation of staff in national and county governments, an issue we have ignored since 2013. With the transfer of some functions from national to county governments, it was expected that staff sizes would reduce at the national level based on such transfer.

Instead the numbers remained intact and new people were hired at the county level resulting in duplication of roles.

Secondly, it is a basic rule of life that people must live within their means. This was the rationale the President gave for his proposal to increase several taxes and cut some expenditure. The question that needs to be answered is whether the taxation measures are supporting Kenyans to live within their means or above their means.

With the budget balanced, the country at the macro level is operating within its means since it is able to finance its expenses. However, at the micro level the levels of taxation may force Kenyans to live beyond their means. This will eventually have a ripple effect on the entire economy and may result in the country being unable to finance the budget as a result of reduced productivity.

Several suggestions have been made that our focus must turn less to the taxation measures and more to the expenditure side. A huge percentage of our expenditure goes to debt servicing. We have to stop accumulating more debt. This is leading us to living beyond our means.

This also means that questions must be had on what the loans are funding. The President already put a moratorium on any new projects unless it is part of the Big Four Agenda. It is time to go much further.

We have to realistically admit that we cannot afford to finance the big 4 under the current financial situation. With these developments, who will really protect the interests of Kenyans? Or are they on their own?