Last week the finance ministry announced a raft of new tax measures it intended to implement starting in the coming financial year.
The public has been up in arms
lambasting the ministry for thinking of increasing taxes or adding new taxes in
this time of financial stress.
I am always amused at the knee jerk
reaction of your man on the street at the sound of new taxes in the offing. Its
spontaneous and loud but peters out just as fast as it erupted. I guess the
bureaucrats too have heard it all before and find it hard to take us seriously.
That being said I was shocked that the
ministry was suggesting a return to the annual road licenses for cars.
In
2007 then Finance minister Dr Ezra Sururma announced the abolition of the road licenses
in his 2007/08 budget speech. He explained that while it was projected to bring
in sh80b, "It is undermined by the high rate of default, rampant
forgery of license stickers and requires a lot of administrative resources to
ensure compliance. This state of affairs is untenable,” he told parliament.
He
said he would recover the “lost” revenues from other sources. The government
decided to put the levy on fuel and ring fence the proceeds for road
maintenance.
For a car owner at the time this was a godsend. It, renewing road licenses was time wasting process that involved waiting in long lines at the URA office to pay for the license and days later, to collect the road license. Default was rife and I would be surprised if the finance ministry would have collected even half of that projected sh80b. Most of the tax was going into traffic policemen’s pockets....
It
was a win-win situation because now every car owner paid the tax. In addition,
all boda bodas pay now and it was pointed out to me recently, that even lawn
mowers pay the tax.
If
there was ever tax that widened the tax base painlessly – for the payer and the collector,
this was it.
The
strangest thing was that URA and the government never divulged how much they
were collecting in the new scheme, which we took as a signal that they were
collecting way more than sh80b and did not want to say.
It
is therefore baffling – it is inconceivable the planners were not driving in
2007, that the ministry would contemplate this U-turn.
And
by the way the return to road licenses should mean that they remove the levy on
fuel, isn’t it?
The
pressure for more taxes is plain for all to see. The Covid pandemic has forced
government to borrow more than planned. While a lot of this was concessionary
borrowing, the budget was already under pressure, with debt servicing
accounting for three in ten shillings of the budget.
That being said we will be forgiven of looking with a jaundiced eyes at such tax initiatives, which if they are what they seem on the surface, we wonder whether the planners are trying to pull a fast one on us. Hoping that we don’t remember how we got to where we are, hoping to take advantage of our good nature...
As an aside the Auditor General
reported to parliament last month that even some of the money we borrow we don’t
utilize. There was the issue of sh1.4trillion that went begging when the
facility expired before the money was disbursed.
Thankfully parliament has thrown up a
real stink about this particular tax measure and rightly so.
Listening to a finance ministry
official on radio this week laboring to explain how the tax will be levied –
according to seats in a vehicle, I couldn’t help thinking it would be helpful
to know how much the original fuel levy was bringing in, if only to help us
determine whether it has done its time or not.
It boggles the mind to wonder which
government would forgo as perfect a tax as this one, where compliance is 100
percent and cost of collecting minimal for a mode of collection where he is not
100 percent certain to collect all the intended tax?
It has to be an unusual situation too, where the tax payer is arguing for a tax he cannot evade and against one which had been shown to be manipulated as Suruma said when he was abolishing it 14 years ago.
