Parliament will today debate the controversial taxes and proposed austerity measures aimed at plugging the huge budget deficit that threatens to sink the economy.
It is a moment to face the cruel reality of the state of our economy. The MPs should do thorough soul-searching and act in the interest of Kenyans.
On Tuesday, Kenyans felt betrayed when leaders of the main political leaders whipped their respective MPs to take a common stand — support the eight percent tax on petroleum products billed as a climbdown from the 16 percent in the existing finance management law.
Yet, on the other hand, President Uhuru Kenyatta had proposed far-reaching taxes that are bound to hit the citizens very hard.
The housing tax for employees, calculated at 1.5 percent of their pay, 20 percent levy on M-Pesa transactions, 20 percent increase in bank transaction charges, up from 10 percent, among others, directly inflict pain on incomes.
M-Pesa has emerged as a popular platform for transactions and largely supports those in low-income brackets. Doubling the charges, therefore, is a major blow to them.
The debate in Parliament should revolve around reducing public expenditure and creating an environment for growth, especially private sector investment.
And this requires a review of our economic management. The tragedy afflicting the country emanates from the propensity for project budgeting that is oblivious to the revenue base.
Underlying that is the obsession with trying to appease the masses without weighing the potential backlash of the action.
Let MPs look at the whole range of tax proposals and discuss each on its own merit. High taxation is poor economics. We cannot sustain high taxes. This contracts growth — reduces jobs, shrinks the consumer base and leads to black market.
The long and short of it is that it reduces revenue — a fact that we have seen in recent years with declining corporate profits, retrenchments and investor flight.
Two, they must vote for budget cutbacks, and this must be dispassionate. Allocations for the Executive and the Legislature must be trimmed and rationalised to free funds for priority spending.
It is galling to hear MPs fighting against reducing the Constituency Development Fund, which they misuse, only to push for cuts in the Executive’s cash.
Austerity measures must apply across all sectors. On this note, the government must rethink those grand projects.
It is ill-advised to root for mega projects under the ‘Big Four’, for instance, when there is no cash to run the economy — worse, when we are trudging under the weight of a Sh870 billion debt that is crowding out all revenues. They should be halted.
We must avoid spending without thinking of revenues.