What we have been witnessing
in the region is unfortunate and
counterproductive. Unhealthy
internal competition has seen the
unnecessary escalation of prices on
mega projects which we can assume
is tied to rent seeking activities.
Lack of cooperation in mega
infrastructural projects will not only
raise the overall cost of the projects
but it will also mean we shall end up
with non integrated systems as each
neighbour goes it alone to grandstand
the other.
We shall lose the advantage of
negotiating as a region and having
an overall strategy that works in the
best interests of the people of the
wider East African region. It will also
have a long term effect of making the
region uncompetitive.
Saddled with expensive foreign
loans and grants and having
multiple suppliers with conflicting
and competing systems will in due
course make East Africa a high cost
production area quite contrary to
what the aims of the integration are.
and this on paper worked perfectly
well. We did see an upsurge in tax
collection and for a while back then
we seemed to have hit on the correct
formula for economic take off.
But another indicator of poverty is
endemic corruption and it kicked
in to subvert the now well oiled tax
collection system. The collecting
agency is now in a panic due to
unmet targets and has started to get
creative on ways to boost collection.
Another indicator of poverty is low
tax compliance which in most cases
is occasioned by high taxes thereby
creating a real incentive to evade and
avoid taxes. Kenya has punitively
high tax rates and as expected tax
cheating aided by tax personnel is
rampant.
There is always a fine balance
between what one would call fair
taxation and a level where paying any
more taxes becomes a disincentive.
The current narrow tax base puts
undue pressure on those the taxman
has captured in the system.
When Kenya embarked on ambitious
tax reforms it was in response to
dwindling foreign aid support which
came with political conditions. It
was correctly determined that we
shall in future reduce our foreign aid
component in our national budget.
In an effort to bridge the tax
collection gap, the taxman collates far
too much detail on too few people
and inadvertently creates the perfect
conditions for corruption. In Kenya
the difference between the legal tax
avoidance and the illegal tax evasion
is too thin.
The bye word adopted was that
“Kulipa Ushuru Ni Kujitegemea”
One unanticipated consequence of
our robust tax system is that our
‘‘Being the leader in a race of lame ducks
hardly gives one the rights to crow and
sadly the other countries in the region seem
more intent on taking over the crowing
rights rather than cooperating to raise the
economic wellbeing of the region.’’
‘‘What will very likely
bring us to our knees
in the region will be
the non harmonised
tax regimes. If the
region does not
endeavour to create
a unified tax regime,
and this looks unlikely
currently, then we
shall end up with a
recipe for disaster as
integration will be
virtually impossible.’
regional partners are still in the
foreign assistance mode for bridging
their budgetary shortfalls and have
therefore not really bothered to
domestically support the running of
the government.
What will very likely bring us to our
knees in the region will be the non
harmonised tax regimes. If the region
does not endeavour to create a unified
tax regime, and this looks unlikely
currently, then we shall end up with a
recipe for disaster as integration will
be virtually impossible.
Non harmonised tax regimes create
far too many loop holes for tax
evasion, escalate tax collection costs
and encourage corruption. Kenya’s go
it alone style in tax management and
failure to rope in the bloc partners
may eventually be what breaks the
regional camel’s back.
Let us hope that our new slogan
does not become “Kulipa Ushuru Ni
Kulemewa’, dubious bragging rights
notwithstanding!!!