Columnists

Bring everyone into the tax basket, including the informal sector

tax (4)

Tax expenditures refer to revenues forgone by the government through granting preferential treatment to certain incomes or groups of people. FILE PHOTO | POOL

Given any debate, I am always likely to swing to the underdog. But when it comes to taxes in Kenya, my view on where the inequity really exists has shifted progressively.

For, how have we let ride so long this idea that it’s just fine that almost 85 per cent of our job holders have never registered for tax?

It’s as if we accord the informal sector some haloed status — and that isn’t out of some issue of poverty.

The laws of Kenya are very well set up to provide a tax threshold, so no one who earns below a minimum salary pays any tax at all.

Indeed, for the poor, registering at low earnings can even bring the benefits of National Hospital Insurance Fund (NHIF) health benefits at no cost to them.

READ: The revamped turnover tax easy to administer

It is the wealthier in the informal sector who would end up putting more into our public purse, and data shows well enough that the majority of our high earners, earning more than Sh100,000 a month, are in informal work — and thus paying no tax at all.

So what do we expect our government to do? As it faces all these freeloaders, would they all happily hand back all the roads, hospitals, doctors and nurses, health workers, schools, and all else that our taxes pay for?

How do we scream when the government is tardy with sending funds to county government: but do we think money grows on trees?

Maybe our farmers, as they now plea for value-added tax (VAT) to be removed from vegetable seeds, having already won tax-free chicken feed, feel that government services are something they are not getting, fuelling their entitlement to opt-out of all taxes.

Yet, during a stay just outside a small town in Siaya, I met locals being paid by the county to clean the streets.

I, additionally, don’t believe, if we pick-axed the beautiful, fast road to that town from Kisumu, everyone would say how it was great to be without it, including those high-earning non-taxpayers.

So, for sure, I am passionate about our farming industry and smallholders are always on my mind. But if the vast majority of Kenyans think taxes are only for the gullible few, then what choice is there but indirect tax – which has no capacity for testing poverty levels, except that how many seeds or chickens people can buy is driven by their economic status?

ALSO READ: Farmers to pay new tax in fresh Treasury policy

Direct taxation is by far and away a fairer system. But for so long as Kenyans opt-out, VAT is just about all that is left.

Fairer still would be consigning our informal sector to history and getting everyone registered for tax and filing tax returns. It’s overdue and fair.