By David Wanjala
After recording a deficit in the national budget, the government once again found itself in a tight spot and was hard pressed in finding ways to plug it. With credit currently out of reach, the President signed the Finance Bill 2018 into law, which brought with it new taxes and levies that have seen many Kenyans up in arms, as they feel that this will only enslave them financially.
The new law has introduced various new fees and taxes besides the anchoring 8% VAT tax on petroleum products. There’s the increase of excise duty on mobile money transactions from 10% to 20%, increase of excise duty on calls and data from 10% to 15%, Sh18 anti-adulteration fee per litre of kerosene and the increase of excise duty on money transactions through financial institutions from 10% to 20%.
As a result, the prices of goods and services have already begun hitting the roof. Apart from affecting individual Kenyans, the corporate sector, especially in manufacturing, is not sitting pretty as investors who always link over taxation to diminished profits are likely to keep off.
In fact a number of organisations have already started considering moving to neighbouring countries such as Ethiopia and Rwanda whose governments are doing the opposite of Kenya – reducing their costs of production in order to attract new investors. Depending on the extent to which the shifting happens, it has the potential to hurt the economy more.
The move negates measures touted to facilitate governments’ big four agenda, as it hinders the objective of the manufacturing sector to create additional job opportunities. The country has faced a high unemployment rate especially among the youth and with this Bill having been signed into law, it can only get worse as employers might shift to job layoffs as counter measure to the skyrocketing production costs.
This current situation was brought about by financial mismanagement, especially of borrowed funds, by the government, mostly through corruption where billions of shillings meant for development projects were misdirected into bottomless pockets of government mandarins. Then there’s the lack of commercial viability of most of the projects on which government has expended the borrowed money, some at market rates with mindboggling interest rates.
Government has been faulted over the years for spending much of its resources on recurrent budget. But at least with that, those on the infamous public payroll spent the money within the economy, be it on investing or even on subsistence. The economy was liquid.
The emerging trend where government expends much of its resources every fiscal year on serving interest on loans, as is the case with SGR, is worrisome. One, the money is repatriated, leaving the local economy dry and, second, the principle stays intact, only drawing interest, which alone affects the economy in a big way. This way, the economy may remain indebted to the Chinese shylocks for ages, leaving us no room to ever unshackle and grow. We need to seriously find ways of disembarking from this enslaving joyride.