Mon. Apr 15th, 2024

Some Kenyans are mockingly referring to President William Ruto as Zakayo – Swahili for the biblical figure Zacchaeus, who is portrayed in the Christian holy book as a greedy tax collector who climbed a tree to see Jesus.

This is because Mr Ruto has introduced a raft of new taxes, and raised old ones, since he was elected president in August 2022, making him unpopular with many Kenyans who believe he has betrayed his campaign pledge to champion the interests of “hustlers” – those who struggle financially.

Mr Ruto has acknowledged that the taxes are “painful” but, in an Independence Day speech on 12 December, said the sacrifices the nation was making “would make our freedom fighters proud”.

For him, higher taxation is necessary to reduce government borrowing, and bring down the national debt, which has soared to 10 trillion shillings ($65bn; £51bn).

“We have made the right choices, sometimes taking very difficult and painful decisions, to steer Kenya back from the edge of the catastrophic cliff of debt distress,” he said.

Nor does the president mind being compared to the biblical figure.

“Since I have already been referred to as Zakayo in some areas, maybe we will have a tax collector day,” he said in May.

But many Kenyans are not in agreement with him. The pain of taxes dominate everyday conversations, especially with the rising cost of living.

They also say the taxes are only helping to fund extravagance in government rather than improve public services.

This perception has grown, especially after Kenya’s Controller of Budget – an independent office that oversees the use of public funds – recently raised concern over the high taxes amid “wasteful” spending, including on domestic and international travel by government officials.

President Ruto, who has made over 40 trips abroad in about a year, has defended his travelling, saying he was seeking foreign investment and job opportunities for Kenyans.

In about the same time, 70,000 private-sector jobs have been lost amid a drastic rise in operating costs, and the closure of some businesses, according to the latest report by the Federation of Kenyan Employers (FKE).

It warns of the risk of more job losses, pointing out that 40% of employers are still considering scaling down their operations.

FKE has called for the government to review taxes, but businesses complain that the government is not listening.

Kenyan plain clothed police officers detain an activist during a protest over tax hike plans in Nairobi on June 6, 2023.

Security forces have been accused of being heavy handed in their response to protests over the economic crisis
Economist Ken Gichinga says Kenya has been discouraging business by placing a heavy tax burden on companies that are supposed to create jobs, make profits and boost government finances.

In the end, some firms relocate to other countries, people who were thinking of opening a small business like a restaurant drop the idea, while existing businesses are forced to go into the informal sector to avoid paying taxes – something that has already started happening.

Mike Muriuki, the director of a 10-year-old company that distributes and markets LPG gas cylinders, tells that tax hikes are suffocating his business.

He says ordinary people have no money to buy cooking gas – that has made his business shrink over the past year from orders of 700 cylinders a day to only 200.

Mr Muriuki says this has forced him to lay off more than 70% of his workers, leaving him with just about 20.

For many small- and medium-sized businesses like his, Mr Muriuki says, the impact of the taxes have been very burdensome – and the conduct of tax collectors has bordered on “harassment” in some cases.

Last month, a Kenya Revenue Authority (KRA) unit with paramilitary training visited one of his premises in Kiambu county, which borders the capital, Nairobi.

The tax agency’s unit was deployed in September to enforce tax compliance.

At his premises, Mr Muriuki says, the tax officers asked for his sales and income records, including from mobile money transactions, as well as his tax returns. They also took pictures of the shop.

It was “scary”, he tells the News.

“The manner they did it [can] put a lot of fear in businesspeople… People think these guys are coming to arrest us,” Mr Muriuki adds.

He says people are “now trying to find ways to hide what they are collecting”, including resorting to hard cash and directing mobile money payments to personal numbers rather than to business till accounts.

An owner of an auto spare parts shop in downtown Nairobi says he has stopped using his business till number amid higher transaction costs.

The gradual shift in the mode of payments has been the subject of recent social media discussion in Kenya, although data from the largest telecoms company Safaricom still shows a rise in mobile money transactions up to September.

Kenya Revenue Authority (KRA) tax agents visit a business in the Eastleigh district of Nairobi, Kenya, on Thursday, Oct. 19, 2023. Deploying 1,400 tax collectors is the most aggressive in a long line of controversial steps by President William Ruto to nearly double the government’s revenue collection to a quarter of gross domestic product by 2030

Tax agents have stepped up visits to businesses as the government tries to increase its revenue
Since July, there has been a tax increase on monthly salaries from a maximum of 30% to 35%, a new 1.5% housing tax, a 2.75% hospital insurance fund levy, a 3% turnover (gross sales) tax on small businesses and a doubling of taxes on fuel to 16%, among others.

Some of the taxes, amid a rising cost of living, led to deadly street protests earlier in the year.

There has also been a steep increase in costs for obtaining identity cards, passports, birth, marriage and death documents.

The owner of a tour company founded in 2017 that mostly deals in outdoor adventure tells he is exasperated by the unfriendly business environment that he now finds himself in.

Speaking on condition of anonymity as he fears reprisals, he says higher taxes have reduced the ability of people to spend on things like travel, adding that everyone in the tourism sector is feeling the heat, but in different ways.

For him, the rapid decline of the value of the Kenyan shilling, even against other currencies in East Africa, has made it impossible for him to plan in advance.

He complains that the Kenya Wildlife Service has decided to more than quadruple entrance fees to parks, yet “there is no [extra] value that is being given”.

“Tourists ask me: ‘What is happening in your country?’,” he tells, adding that Kenya is destroying its tourism market as people can get better deals in neighbouring Tanzania and Rwanda.

In the last couple of months, he has not organised any local tours – and has moved into other sectors, including farming, to survive.

KRA, in a report on 11 December, says it has maintained an upward revenue growth since July, but it was below its annual target, as the increase in the price of oil had driven down demand for imports.

It acknowledged that demand for domestic goods and services had reduced, while also citing an increase in lending rates and a reduction in banks’ profitability.

A fortnight ago, the treasury minister told MPs the country was finding it difficult to get money to pay civil servants’ salaries as well as to give MPs money for their constituency projects, which means there will be less development.

With such a gloomy picture, many Kenyans are hoping that Mr Ruto will offer them relief and back down, just as Zaccheaus eventually did when he climbed down a tree after Jesus called him.

By Joy

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