SAM'S SENSE: Do your taxes make sense?

Tonight, I reflect on the concept of taxation, taxes, levies and deductions.

For starters, tax is that compulsory deduction charged against an income, be it on an individual or a business.

That charge on goods and service that we buy, it is what funds a social contract between the people and a government.

That the people's collective contributions will fund public services rendered to them. It is the people meeting their end of the bargain.

Over the years the amount of tax collected keeps growing; more and more Kenyans are funding the government. But there has been a trend in the recent years. There has been a growing appetite for more cuts from the same pool of tax-paying Kenyans.

There appears to be newfound excitement to keep going for more from the same pockets, in the excuse of promoting equity. What equity?

And so to portray Kenyans as tax evaders is not only unfair but also insulting. Insulting to Kenyans who have been dutifully, faithfully and diligently paying their taxes even when they have no clue where it’s going.

As to whether they would still pay if they had an option is a totally different conversation altogether.

You see, monetary payment is usually made in exchange for a service or good. Kenyans expect commensurate diligence from the government in honouring its promise. But what do we have?

How are the services at your nearest health facility? And has it been improved to the next level as was promised some three elections ago?

Some, if not most hospitals have no medicine for common ailments, they have no medical specialists for some of the most common non-communicable diseases in the regions; we are endurers of one of the most disappointing healthcare system on earth. But we pay taxes.

And how is the road to your nearest town? You see we have enough bad roads; in fact some Kenyans in Kisii have been planting banana suckers in the “farming potholes” that erupted in the middle of some of those roads, in protest. But they pay taxes.

I will not go into the public transport system, security sector or even our education system. I won’t.

I’d say, it would make some sense if some humility attended to the frenzied introduction of new levies and all manner of taxes. Humility because there remains a huge gap between payment of taxes in Kenya and the delivery of reciprocal services.

Secondly, I wonder if anyone has ever bothered to do the Math, at least to make sure that these things make sense.

You see, the Economic Survey of 2023 shows that inflation has been on a rise over the past few years. If I deploy my accounting skills for a moment, the inflation rate over the last five years has averaged at nearly 6 per cent.

Now, the average income in Kenya is just over Ksh.20,000. If you discount this against the inflation rate, then it means that over the last five years, a Kenyan with an income has lost nearly 30 per cent of its value.

Put simply, the Ksh.20,000 of today is worth just over Ksh.14,000 of 2018. I hope you get the drift. That if your salary hasn’t changed over the last five years, you have lost almost 30 per cent of its value to inflation.

And oh! I have not factored the taxes yet. For those earning over Ksh.24,000, you must be charged PAYE tax of up to 30 per cent. That is before taking away statutory deductions for NHIF, which now is being proposed to rise.

Remember your NSSF contribution is the first charge before taxation, it rose some two months ago to a maximum of Ksh.1,080. And once you have received your net pay, you must diligently pay for the value added tax as you shop for your household. This is to continue funding the government of Kenya and its services to the people.

Collectively then, it is not farfetched that Kenyans lose nearly 50 per cent of their incomes to taxation and deductions; and that is a conservative estimate.

And yet, to survive, a normal Kenyan household must buy food: unga, rice, sugar, vegetables, cooking oil or fat and spend some money on cooking fuel. Woe unto you if you use cooking gas. Let’s not even talk about how you get to work.

You see, the World Bank recently revised the global poverty line to be households that live on less than 2.15 US dollars daily.

In Kenyan terms, that is just under Ksh.300 a day. There are nearly nine million Kenyans in this bracket.

Our focus as a country should and must be on efforts to reduce this number, to bring dignity to the poor and more importantly to make life bearable even for those with an income. To allow them a better purchasing power; to also grow their savings into investments that widen the tax bracket.

Finally, a little whisper to all those in authority both at the county and national levels; those who get the privilege to issue decrees on imposition of taxes and levies. Please gather your on-ground-information more accurately.

When you do, you are likely to discover the shocking disparities of Kenyans’ economic situations. You will also be confronted by the reality that is the gap between the haves and the have-nots.

Every levy, every new tax imposed on any Kenyan must be affirmed by the global picture of the national economy. Anything short of such appreciation of the aggregate picture will reduce taxation to cruel high-end gated community decision.

Taxes and levies too must make sense.

And that’s my sense tonight.