Government revenue is a tightly boxed corner for Kenya, as it tackles afresh, a huge agenda of inequity in health, education, nutrition and opportunities. For sure, spending is the easy part, be it on buying telecom companies or raising the salaries of MPs' support teams.
But when it comes to raising revenue, the problems get far harder. With the vast majority of Kenyans working informally, our tax base is very small. The last government really made progress in this, lifting the number of Kenyan taxpayers from less than three million five years ago, to 4.4 million by 2020, and 5.5 million by 2021.
But it's still a tiny base to fund public services for a population of 56 million. Indeed, the UK’s Institute for Fiscal Studies considers it shocking that 43 per cent of Brits aren’t paying taxes, but that’s a carrying rate of less than one non-taxpayer for each taxpayer. By contrast, with half the population still minors, our noble Kenyan taxpayers carry the public spending for another four adults each.
The idea that we can now make that tax stream go further by tapping the super-rich to give an extra boost has certainly got the populist appeal. The bigger problem is that getting taxes out of the super-rich is super hard.
For, if we mean really rich people, they have batteries of accountants, advisers and specialists, who earn hearty salaries for reducing their tax bills. Super-rich people don’t just sit still and say, but, of course, have an extra 10 percent of my earnings. They avoid tax in every way conceivable.
It’s the middle-earners who can’t walk that path, and maybe it is these Kenyans who are our super-rich now because if they aren’t, we really don’t have many people to fuel this boost.
The Knight Frank Wealth Report has had years where Kenya hasn’t ranked a single person in their own super-wealthy bracket. It has set a lower cut-off for Kenya, where the wealthy are those who have more than $20,000.
So, maybe anyone earning over Sh160,000 a month could enter that door. Yet, at Sh100,000 a month, we had fewer than 80,000 taxpaying citizens in 2021. At Sh160,000, we have far, far fewer. Let’s suppose (and there aren’t) that there are 30,000 people earning that much, and we could get an extra Sh30,000 in tax from each one of them (ambitious), it wouldn’t even add Sh1 billion to our tax take a month.
I’m all for taxing the super-rich, but when you have very few, and they are the least likely to be paying even regular taxes, let’s not hold our thumbs yet for a big revenue boost from that quarter.
The writer is a development communication specialist.