The solution to Kenya’s debt and tax problems
We have had a contentious finance bill which has been violently opposed by Kenyans in yesterday’s protests. In a previous post, I proposed that the root cause of the problem is devolution. You can read that post here:
The basic fact is that we can’t afford to sustain this large government we currently have. To give you some basic figures, our current tax revenue annually is 1.4 trillion, while the annual government spending is 3.2 trillion. Since figures in the trillions are not very relatable, let’s cut off some zeros. Imagine a man named Ondiek had an income of 14,000KSh, but his monthly spending was 32,000KSh. How would Ondiek survive? He would have to become a loyal customer of loan apps to make up the difference!
This is the exact same thing the government is trying to do on a larger scale. We have this massive government after devolution and it needs a hell of a lot of money to be sustained. Therefore the government has to take loans, and to pay back those loans, they have to keep increasing taxes.
Now let’s go back to Ondiek. If he was to decide to get out of that debt trap, he would have two options: to either find a new job that pays him at least 32,000KSh, or he would have to cut back on his expenditures to fit his 14,000KSh salary. These are also the two options the Kenya government has: to either find new industries that can generate tax revenue, or to cut back on expenses.
Increasing revenue vs cutting back costs
Let’s look at the first option: finding new industries to generate tax revenue. In the last 10 years the new industry that has boomed in Kenya was betting. The Kenya government has already taxed this sector to near death and still the tax revenue can’t match the government spending. We also had discovery of oil in the Northern region which would have been massive for tax revenue, but that has amounted to nothing.
Therefore the only option we are left with is cutting back on expenses. For me I propose drastic cutbacks, where we even consider a referendum to take us back to the 8 province system. When you look at Kenya’s debt chart, that is we could comfortably afford
We have tried the devolution system for 11 years now. It is time to admit that, while it was a good idea in theory, it hasn’t worked in practice. We simply can’t bear the amount of tax it takes to sustain the devolved government and we need to roll back to the province system which wasn’t straining us so much as a country.
