What you need to know:
- National Treasury is under pressure to generate high revenues.
- Designing a highly ambitious budget like this year’s is understandable.
The new tax proposals submitted to Parliament for debate require thorough scrutiny. Treasury Cabinet Secretary Ukur Yatani is seeking to amend Finance Act 2021 to get powers to set Value Added Tax (VAT) without recourse to Parliament. This is risky and undemocratic.
National Treasury is under pressure to generate high revenues. This time round, it has a Sh3.6 trillion budget to finance and the temptation to intensify raid on wananchi’s pockets is great.
Which is what must be resisted. Designing a highly ambitious budget like this year’s is understandable given the government’s development agenda. More importantly, Kenya is grappling with Covid-19, which is not just a health challenge but also social, economic and political.
The economy has been shattered by the pandemic. Sectors such as hospitality, transport and manufacturing have been dealt a severe blow due to lockdowns and other restrictions.
Thus, it is not possible for the Kenya Revenue Authority (KRA) to generate revenues to meet the needs of the national and county governments. In the immediate terms, the government has to roll out a recovery plan to put businesses back on the rails.
This explains the desire to up tax collections. But the corollary is true. Citizens are hard pressed; businesses have collapsed, hundreds of employees have been retrenched and generally earnings wiped out. Any proposal to introduce new tax regulation must be debated in Parliament. The principle is; no taxation without representation.
Tax collection is a vexed matter. Many big scale businesses and enterprises do not pay taxes. Largely it is the workers in formal set-ups who KRA can reach, who pay taxes. The tax base should be expanded but the rates kept minimal.
Parliament should critically examine the new tax proposals and make proper decision bearing in mind the prevailing economic conditions. No single entity should appropriate the mandate of setting tax regulations without concurrence of Parliament and stakeholders.