Kenyans Protest Tax Increases Amid Economic Hardships

Kenyans are protesting substantial tax increases that have severely reduced their take-home pay and deepened economic hardships. These measures, initiated by President Ruto, include raised excise taxes, increased payroll taxes, and new import tariffs. With mounting debt and a struggling economy, widespread dissatisfaction is sparking fears of renewed unrest as the country grapples with the impact on public services and overall financial management.

Kenya is currently grappling with significant tax increases that are raising concerns among citizens. Heavy deductions appearing on pay stubs are funding new initiatives for affordable housing and health insurance, alongside increased contributions to the National Social Security Fund. Those earning a monthly salary of 45,000 shillings have seen their take-home pay drop by 9%. Kennedy Odede, founder of a self-help association in Kibera, notes, “People who are salaried are crying.”

These payroll tax hikes are part of President William Ruto’s urgent attempt to boost government revenue amidst mounting debt. New excise taxes on sugar, alcohol, and plastics have also emerged, with business profit taxes jumping to 3% from a previous lower rate. Moreover, fees for money transfers and mobile data services surged by 15% to 20%, raising concerns about affordability. A tax on essential imports aimed at funding railroad projects has been pushed up to 2% from 1.5%, and even certain exemptions for retirees have been eliminated.

Tax hikes are, understandably, unpopular. However, for a country like Kenya—struggling with low income and dire debt conditions—the effects are especially severe. A history of reckless borrowing and spending, exasperated by the COVID-19 pandemic and rising inflation, has propelled Kenya’s debt to a staggering $80 billion. The nation is effectively tying up nearly 60% of its revenues for loan repayments. This is a widespread issue across many African nations as they often spend more on debt interest than on essential services like health and education.

Kenya’s financial management is critical for future growth; however, raising revenue proves challenging. Approximately 40% of the population lives in poverty, with youth unemployment soaring past 25%. The economy largely consists of small businesses and subsistence agriculture. Current estimates suggest that around 83% of the labor force operates in the informal sector, making it nearly impossible for tax authorities to collect from these workers. Thus, the weight of taxes falls heavily on the minority who earn regular salaries.

Elizabeth Okumu, an employee at Shofco, a non-profit organization, expresses frustration over declining purchasing power. Just six months ago, 1,000 shillings sufficed for basic groceries; now, it barely covers sugar and flour. “Our buying power has really decreased because of the taxes,” she stated. The economic crisis has eroded the value of the shilling against the dollar, exacerbating import costs.

In the past year, similar tax proposals have triggered violent unrest in Kenya, with over 50 lives lost and parts of parliament burned. Although the government briefly relented, many tax increases were reinstated shortly after. Now, they are discussing a new loan package with the International Monetary Fund, which may impose additional requirements regarding spending cuts and revenue generation. Yet, as one commentator notes, “you can’t squeeze much water from a wrung-out towel.”

Widespread discontent about tax policies underpins a deeper skepticism toward the government’s capability to effectively manage repayment of debt and deliver public services. Reports from Nancy Gathungu, the auditor-general, highlighted extensive corruption and mismanagement, including unexplained expenses over $1.24 billion intended for debt payments and missing COVID vaccine funds valued at $64 million.

Tatiana Gicheru, a student at Strathmore University, voices frustration, stating, “Ruto says we need to pay our debts, but there are no public services to show for it.” Her friend, Jewel Ndung’u, also struggles to find work despite applying for numerous jobs after graduating. They both stress the need for improved public services and accountability, questioning the government’s spending habits.

In 2022, taxes accounted for 16.6% of Kenya’s total output, which aligns with other African nations, but it’s notably lower than wealthier industrial nations. As the anniversary of last year’s riots approaches and talks of commemorative protests gain traction, fears are mounting that renewed unrest could erupt, especially with the government potentially outlining more tax hikes in its new budget. As Okumu puts it, “People work so hard, hoping that tomorrow they’ll see the light. But when tomorrow comes, it’s still darkness.”

In summary, Kenyans are facing a series of tax increases that are drastically reducing their take-home pay while further exacerbating the ongoing economic crisis. With rising costs and persistent poverty, widespread dissatisfaction with government actions is leading to speculation of renewed unrest. The ability of the Kenyan government to navigate this financial landscape while ensuring public services and managing debt remains uncertain. This precarious situation highlights the urgent need for systemic reforms and responsible governance.

Original Source: www.thestar.com.my