Raising taxes on airtime and bank loans ill-timed

Nation Media Group

With a stroke of the pen, President Uhuru Kenyatta will confirm or block the tax increases on cooking gas, mobile airtime and bank loans, as contained in the Finance Bill 2021.

While the reasons for the taxes have been explained, the timing of their introduction is wrong. They will hurt the pockets of ordinary Kenyans already suffering from the current economic difficulties most.

Many households are struggling to make ends meet in the wake of massive job losses in the past 15 months when Covid-19 has been ravaging the economy.

Businesses have also suffered due to reduced purchasing power in the economy, as has the exchequer which is now having to borrow higher amounts in order to balance the books.

Proponents of the higher taxes point to this budget deficit as a reason to raise levies.

However, they shouldn’t ignore the fact that those being taxed need money in the pocket as well to enable them to see out the pandemic and play their part in rebuilding the economy.

We are of the opinion therefore that any taxes that negatively affect the livelihoods of Kenyans and the recovery of the economy should be frozen, at least until such a time when the economy recovers sufficiently.

The Treasury may point to the budget financing needs, and the fact that there is a ceiling on how much it can borrow to fill the gap.

We cannot emphasise enough the importance of prudence spending. The government must rein in wasteful spending.

Fiscal consolidation, according to many experts, has proven to be a problem for the current regime, with counties also adding to this burden with their bloated recurrent expenditure.

The Kenya Revenue Authority (KRA) has also disclosed that it has flagged 1,058 companies and individuals suspected of evading taxes worth Sh132 billion in the current fiscal year.

It is these tax cheats that the government should be chasing, rather than adding more taxes to the already compliant taxpayers and going for low hanging fruit such as excise and VAT.

If the KRA can recover just a tenth of the dues owed by the tax cheats, the Treasury will have raised the equivalent of the additional amount it hopes to get from the new taxes.