Kenya’s economy has lately been under massive pressure as the public debt spiraled to the ceiling, literally hitting the Sh6 trillion limit and counting. What this has meant is that we are using most of our revenues in servicing debt with development projects consequently suffering. In the midst of all this, the Kenya Revenue Authority (KRA) is rightly or wrongly expected to rescue the situation.
And it has set out to do so with unprecedented gusto at a time its officials are in a credibility crisis.
The Treasury, responsible for much of the fiscal mess in the country, has leaned on the taxman, setting routinely unachievable targets. While KRA misses the targets with little qualms, it has set out with gusto to raid individuals and corporates suspected of dodging taxes.
In the process, KRA has been seen as out fishing by aiming at taxpayers it has all along, for some reason, not paid much attention to. KRA, perchance, could just be doing what it should have done all along. But now it is giving us and probably the public reason to question its prudency.
Its policy in the alcoholic beverage industry—where most players dodge taxes—is leaving a lot to be desired, even disregarding the recently overhyped prosecutions. Its recent requirement that distillers sell the 250ml bottle of spirit at no less than Sh150 is a good case in point.
As the Competition Authority has pointed out, this goes against the anti-trust law.
KRA claims to know the ingredients and expenses of the distillers and hence the right price. But why Sh150 and not Sh200? We agree with watchdog that KRA should mind its business and not try to distort the market through non-existent powers. Indeed, KRA and the Treasury have in the past been accused of pitching for the big boys in both the alcohol and tobacco industries and nothing exposes them to such suspicion than the current order.
Raising the price of affordable alcohol will help the big boys and punish smaller indigenous players while possibly cutting tax collection. It will drive the poor to illicit beverages where KRA collects zero tax, instead raising more revenue which could as well be the objective.
The watchdog is right and KRA should cease and desist.