Uhuru Assent On V.A.T Law Was A wrong-headed Economic Decision
It was a wrong-headed economic decision for President Uhuru Kenyatta to sign into law the infamous Value Added Tax (VAT) bill that dramatically imposed 16% tax on all commodities. Unscrupulous and corrupt traders quickly capitalized on presidential assent to make a quick buck out of the sweat of the Kenyan people.
Mr. President has now back-peddled. He seems to regret assenting to VAT bill that slapped Kenyans with hiked prices. It’s a no brainer. The domino effect of imposing VAT law was to be expected. Unprecedented price-hike against essential commodities was inevitable. Yet, instead of taking ownership of the results precipitated by the VAT domino effect, Mr. President is blaming ghost unscrupulous traders.
Mr. President has now instructed the treasury to “publish regulations clarifying” VAT law because he is “sensitive to the vulnerable.” Mr. President claimed that his government introduced VAT law to “cushion the poor.” To the contrary, imposition of VAT law was a slap in the face of the poor, the vulnerable and the working middle class Kenyans who struggle to make economic ends meet.
Taxing people through their noses never has and never will stabilize economy. You do not have to be an exceptional economist to know that economy is stabilized by three main factors.
Factor number one is national security and political stability. A secure nation that has a relatively stable political environment has the ability to spur economic development. Unpredictable security and broken politics nurtures conducive environment for unpredictable and sluggish economy.
Take Tanzania. It’s economic speed is moving tremendously not because TZ has strategic economic plans. Rather, she has political stability and a secure homeland. A secure country boosts investor confidence and curbs unnecessary speculation that deals a blow to economic market. Moreover, investor confidence attracts investment, thus; creating employment opportunities.
Factor number two is cultivation of a spending culture. Recently, America drifted into the worst economic recession reminiscent of great depression. Yet, In spite of the recession, American economy is back with a bang. US is soaring again thanks to the spirit of American consumerism.
Americans spend a lot. They eat out, they buy gifts, they eat a lot, they spend money virtually on everything-they buy, they buy and they buy. Although we cannot spend like Americans, we need to domesticate and incentivize spending culture if we are to have a booming economy.
But how can we adopt a spending culture when we are being suffocated by taxes? Imposing un-necessary taxes on people discourages expenditure. Hiked VAT will precipitate hiked costs of production of goods and services. In the end, we may find ourselves in deep recession because consumers would rather save for a rainy day and purchase contraband goods than spend their money on legitimate commodities whose prices are in the roof.
Factor number three is annihilation of corruption. The current corrupt state of our nation is hostile to economic growth. According to Transparency International (TI), Kenya is the fourth most corrupt country in the world. That’s sad. Corruption has eaten into all our opportunities. Before we embark on reforming our tax system, which I agree need some tweaking; we should end or at least reduce corruption. Kenya loses billions to corrupt cartels, money that can be invested to transform our economic landscape.
The question that remains unanswered is whether Mr. President undertook a unilateral economic decision or he included his economic advisors in the decision making process. Either way, it was a wrong-headed economic decision for president to assent to skewed VAT law. If I were president Uhuru, I would fire or at least re-deploy my economic advisors. They are a disgrace. They embarrassed Mr. President.
By Jacktone Ambuka, a Kenyan residing at State College Pennsylvania USA. You can reach me by email [email protected],