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How to tax the mega-rich Kenyans with little pain

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A tax of up to three percent on less than 1,900 richest Kenyans could raise enough money to hire over 138,000 teachers and nurses. FILE PHOTO | AFP

A tax of up to three percent on less than 1,900 richest Kenyans could raise enough money to hire over 138,000 teachers and nurses.

As Oxfam’s inequality report Survival of the richest shows, the world’s super-rich meeting in Davos are increasingly becoming richer even as tens of millions of slide into poverty.

In Kenya, we are living in a country under mounting and mutually reinforcing crises that are making lives unbearable for ordinary citizens.

I see it every day on the streets of Kawangware, Nairobi and in my home village in Subukia, Nakuru. Millions are going to bed hungry.

The current cost of living crisis has pushed the prices of basic items such as food to a historic high.

Kenya's economy has grown massively in recent years, with nominal GDP doubling between 2015 and 2022. But most of the gains have gone to the richest few.

Even the World Bank reckons that economic growth since 2015 has benefited rich Kenyans.

Read: MWINZI: Wealth, cash deposits low hanging fruit in expanding tax bracket

According to Oxfam’s analysis based on the data from Wealth X, the four richest Kenyans with a combined wealth of $2.71 billion (Sh333 billion) have the same wealth as the poorest 22 million people.

Between them, the richest 130 Kenyans each worth at least $50 million (Sh6.15 billion) and having a combined wealth of $18.7 billion (Sh2.3 trillion) own more wealth than 33 million Kenyans.

In the decade since 2012, the wealth of the richest Kenyans each with at least $5 million (Sh615 million) has surged by 123 percent (in nominal terms) while their number is up 135 percent.

Yet 18 million Kenyans are still living in extreme poverty.

Kenya has been collecting fewer taxes as a share of GDP in recent years, with tax collection falling from 19 percent in 2014 to the current rate of about 15 percent.

Yet it is the poorest who bear a disproportionate tax burden as they get hit by numerous sale taxes such as the VAT.

Taxes that specifically target the richest people such as property, inheritance and net wealth taxes are at very low rates or missing.

Taxing the richest would raise much-needed resources for tackling pressing challenges we are facing.

According to an analysis by Oxfam, Institute of Policy Studies and Patriotic Millionaires, a net wealth tax on the richest 1,890 Kenyans at a rate of two percent on the millionaires worth above $5 million (Sh615 million) and three percent on those with wealth above $50 million (Sh6.15 billion) could raise $731 million (Sh90 billion) a year.

This would be enough to hire 100,000 teachers in public primary and secondary schools and more than 38,000 nurses to close the teachers and nurses gap in the education and health sectors.

All that revenue from just less than 1,900 people.

Oxfam’s report Survival of the richest shows how we can tax the richest to reduce the concentration of wealth and power and to raise revenue for investing in public goods.

Also read: Wealth creation: The right money mindset you need to master

Here I highlight just a few.

Begin by permanently increasing taxes on the richest 1 percent, with the highest rates on the dollar millionaires by taxing more of their income.

Personal income tax should be made more progressive by increasing the top marginal rates for the super-rich Kenyans.

Capital gains -income from stock, shares and rent should be taxed at the same rate as, or higher than, that from salaries and wages.

Secondly, tax the net wealth of the richest permanently to reduce wealth concentration and influence.

Taxes that specifically target the richest such as inheritance and property taxes should be introduced or made more progressive.

Thirdly, enhance the capacity of the Kenya Revenue Authority through legal framework and funding so they can track the wealth of the richest.

Fourthly involve relevant stakeholders in tax policy formulation including the public, media, civil society organisations and marginalised groups to prevent the richest from hijacking tax policy decisions.

Addressing the widening gap between the rich and the poor will take this country to greater heights.

Antony Kamande is the Inequality Research Coordinator at Oxfam.