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Kenyans hurting from punitive tax system

A growing number of Kenyans are frustrated by the country’s ever expanding national tax structure, according to a new study which predicts rough months ahead as Kenyans head to the polls in August 2022.

The Revenue Collection and Economic Justice Kenya National Tax Outlook Survey – 2021 by the East African Tax and Governance Network (EATGN) in its findings, has further warned that punitive tax system may force big businesses to leave and take thousands of jobs with them.

It is also blaming the current state of affairs to looting by state employees and highly connected individuals including Parliamentarians.

“More than half of the respondents felt that the tax system is unfair as poor people pay too much tax. Thirty percent felt that corruption allows for unfair tax avoidance while 8 percent lamented that wealthy people are not required to pay enough tax,” notes the report released yesterday.

Out of a total of 1,525 respondents who took part in the in the survey felt, half of the respondents cited the current tax system as being unfair, 23 percent thought of it as fair, 19 percent and 8 percent respectively thought that it is very fair or are not sure.

Those interviewed also blamed the high taxation by the current regime to the undying and ever increasing appetite by the government to borrow externally in order to finance its operations including paying its struggling public workforce.

A whopping 86 percent of those mentioned above cited the external debt as a very serious problem, with 8 percent claiming it is somewhat a serious problem, and only 4 percent thinking it is a minor problem. There were no significant differences across the demographics as they were all of similar opinions.

With the economy stalling and investment dropping mainly due to the existence of Coronavirus pandemic, Leonard Wanyama, a coordinator at EATGN, has urged the government to reconsider tweaking its tax policies and create awareness of the same.

“Despite the fact that these recently proposed taxes have an important bearing on pertinent issues in the lives of Kenyans, more than half of the interviewed population lacked knowledge of them,” he said, adding that only a quarter of the respondents could recall proposed taxes on an increase in fuel-levy 25 percent and on VAT imposed on bread 17 percent.

The report identified lack of knowledge of the proposed taxes as an impediment.

The Cabinet Secretary for the National Treasury and Planning, (CS) Ukur Yatani, in June this year presented a Sh 3.6 trillion budget for the financial year 2021/2022 – which through the Finance Bill 2021, introduced a 16 percent Value Added Tax (VAT) on the supply of ordinary bread and increase exercise duty on motorbikes to 15 percent.

This would mean an increase in the cost of bread and means of transport.

The bill also introduced a tax on digital and online businesses at 1.5 percent of the gross transaction value and proposed to increase taxation on alcohol manufacturers, loss making companies as well as retirees income tax.

“Despite these new taxes touching on issues pertaining the daily lives of Kenyans, it seems like more than half of them – based on research results from a sample interviewed – lack knowledge on these tax proposals,” the report said. About 54 percent were within the age bracket of 18 to 34 years. A majority of the respondents or 67 percent had an education beyond secondary school. In terms of employment status, a majority, 53 percent, were jobless, and 32 percent were employed in the informal sector.

 

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