If President William Ruto, aka Zakayo, is spoiling for a bigger and bloodier maandamano, he can just ‘hint’ that he is not yet done with turning up the tax knob.
Alas, that is what his Cabinet Secretary for National Treasury and Economic Planning Prof Njuguna Ndung’u is purported to have said on August 11, 2023 at a joint retreat involving officials from his ministry and some committees of the National Assembly, according to an article in the People Daily, a local daily in Kenya.
The spooking headline, whose screenshot has been widely shared, reads: “CS Hints at Imminent Tax Increase to Spur Growth.”
Treasury officials we spoke to insist the guys at Kijabe Street got it wrong.
The author said Ndung’u “emphasized the need for Kenyans to prepare for the possibility of heightened taxation.”
This is aimed at stimulating economic growth and supporting the government’s development objectives.
“We need to raise revenue. Taxation provides the basis for growth, reliance on debt and borrowing on other people’s savings will not yield tangible development, hence the need to raise revenue from domestic sources,” Ndung’u is quoted to have said in a statement.
Increasing tax rates could be downright insensitive.
Kenyans are yet to recover from the shock of the various punitive tax measures contained in the contentious Finance Act 2023, which the World Bank admits will erode consumers’ purchasing power in the near term.
Aggrieved Kenyans have even moved to court in an attempt to stop the implementation of the new law or at least have some of its provisions like the 1.5 percent Housing Levy declared unconstitutional.
The doubling of value added tax (VAT) on fuels from eight to 16 percent has particularly been painful. Higher pump prices have forced a dramatic lifestyle change for a lot of Kenyans. Some socialite middle class have quickly switched to Matatus as their preferred mode of transport.
Even more irksome for salaried employees—those dynasties with pay slips— is the impending double slap from the Kenya Revenue Authority (KRA) on their August paycheck. The taxman has stated that it will backdate the Housing Levy, that is charge it at the rate of three percent to cover the months of July and August. Sigh.
The cost of sending money through the mobile money transfer services such as M-Pesa has also gone up after excise duty on the same was increased from 12 to 15 percent.
It does not help that the cost of living has generally been unbearable for most Kenyans, with increase in consumer prices over a 12-month period, or inflation, hitting a five-year high of 9.6 percent in October last year. The sky high inflation was occasioned by a spike in food and fuel prices.
Inflation, as captured by the Kenya National Bureau of Statistics (KNBS), has since declined to 7.3 percent in July largely due to favorable weather. But, kwa Mtaa, ni kubaya.
So, even with this, did the good Prof hint at inflicting more pain on hardworking Kenyans by increasing taxes in the future?
For starters, the government gets its money by “raising” revenue. The monies could be in the form of taxes, debt, dividends, director fees, license fees, royalties etc. Check out, for example, “The National Treasury—Statement of Actual Revenues and Net Exchequer Issues as at 30th June, 2023.”
Read alone, the CS’ quote is ambiguous. Is the CS talking about the current revenue-raising measures contained in the Finance Act, 2023 or is he referring to future plans to raise revenue?
Context is needed, not only by reading the entire statement from Treasury but also from the deliberations that the CS had with the legislators.
In story-telling, context is critical. But for one to get the context right they must have the right content. Is “raising revenue” the same as “increasing taxes”?
The word to underline is “raise.” In the Oxford Dictionary, the word has different shades of meaning. The first one is to MOVE UPWARDS: “to lift or move something to a higher level.”
‘Raise’ also means to INCREASE: “To increase the amount or level of something.” It could mean increasing salaries, prices or taxes.
Yet another meaning of the word “raise” is to COLLECT MONEY/PEOPLE: “To bring or collect people or money together.”
Which one did the professor mean?
A financial analyst that spoke with MtaaSkika reckons that People Daily might have jumped the gun by assuming that raising revenue is synonymous with increasing taxes.
In public finance parlance, “raising revenue” is not the same as “increasing taxes,” said the expert.
Raising revenue simply means collecting money. The CS is putting emphasis on collection of taxes rather than reliance on loans. As to whether this will be achieved by increasing tax rates (for example, by doubling the VAT on petroleum products) that is another discussion.
There is no evidence in that statement that Prof Ndung’u was talking about increasing tax rates.
As such, there is no need for maandamano. Just not yet.