There is no annual period that captivates the Kenyan society more than the times preceding, during and after budget reading by the Treasury secretary. Apart from the pomp and rituals that come with the reading of the Budget statement in Parliament, there is always the pain that comes after the government lays bare its expenditure plan.
Often, the government’s spending projections are usually significantly higher than the available funds in our national coffers. High taxation of necessary goods and/or services and a normally high borrowing spree become thorns in the citizens’ flesh. Life becomes harder for the common mwananchi. From then on, it becomes a double edged sword.
The little they would have managed to save and subsequently invest will be gobbled down by the high standards of living. The government's borrowing spree will have the ripple effect that instead of setting aside money for development, it uses the financial resources to repay debts that normally have stringent conditions attached to them.
The truth is that unless we change our entire national fiscal planning and execution we will havea vicious cycle whose results will be everything apart from improving the lives of the commoner. Clearly, the revenue collection tactics employed now cannot sustain our rate of growth or our aspirations as a nation.
We have to think outside the box, adopt and improve whatever has worked elsewhere and innovate partnership strategies that will improve the pockets of the common man. In my view, the Kenya Revenue Authority (KRA) needs to incorporate other measures to increase revenue collection.
Many are the times that the KRA has fallen short of its revenue collection targets. It can avoid this in two main ways. One, casting wide the revenue collection net. And two, employing new technologies in data collection. These two ways are intertwined. The current situation is that few people pay the taxes that end up sustaining the majority.
One of the overlooked but a major economic driver is the Micro, Small and Medium Enterprises (MSME) sector. Why not reasonably tax this sector? If we can bring this sector under the taxation bracket much will be added to the coffers. However, casting the taxation net wide cannot succeed unless it is data driven. There is a whole lot of data imprint that if collected, dissected, assimilated and executed would help in raising revenue.
How many people either file nil returns or falsify their tax records? Yet these people have mobile money accounts, bank accounts, have known businesses (that are presumably legally registered) and even some of them are buying tangible assets like land or investing in saccos and the Nairobi Securities Exchange (NSE)?
This is where KRA needs to use new technologies like Big Data, Artificial Intelligence, Data Analytics and even Blockchain. This will be possible if KRA engages in strategic partnerships with other players and absolutely guarantees the integrity of the data in its possession.
One facet of raising revenue is to allocate funds for development purposes. And currently most of our revenue goes to recurrent expenditure. Why can't the government seriously pursue Public Private Partnerships (PPP)? For any massive infrastructure project, why can't the government encourage private corporations and individuals to be their development partners.
A simple strategy would be Build, Operate and Transfer (BOT). Under this arrangement, the private entities entirely fund and perhaps build the infrastructure project, operate the project until they recoup their investments and afterwards transfer the project to the government.
All these can be done under the clear supervision of the government to ensure that the major beneficiary of such a project will be the public not the private partner(s). If there is enough goodwill it can work for there is a lot of financial muscle possessed by pension schemes, insurance companies, saccos and even wealthy individuals. Under the BOT arrangement it can be devolved up-to the county level. If managed well, it will have a two - pronged accrued benefit.
One, development projects will be undertaken without a seemingly huge burden to the government and two, the citizenry will be investors who will end up having more money in their pockets. In the event the government wants to float bonds why not do so at NSE?
My thoughts are not conclusive but just a way to show that by thinking outside the box we can slowly solve the budget deficit that perennially faces us.
Kelvin Mugo via email.