This week I received a rather disturbing message in my e-mail inbox from my bank.
Dear Valued Customer,
The Government of Kenya, through the Finance Act 2012 and Finance Bill 2013, has introduced a 10% excise duty to be charged on financial services. The service fees on which the duty is to be charged includes bank fees, commissions and other charges, excluding interest. As per the Finance Bill 2013 the effective date in respect of this duty is 18th June 2013.
This is to therefore kindly notify all our valued customers that the said excise duty shall now be payable to the Kenya Revenue Authority.
Please feel free to contact the nearest branch or your relationship manager for more information on this issue.
Yours faithfully,
Bank X.
When I sat back and reflected on the message, I realized that; the bureaucrats at the government who drafted the Finance Bill, the Members of Parliament who passed the bill and the president who assented the bill into law were on to something stupid and silly. Something that had the potential to debilitate and enfeeble Kenya’s banking industry that has seen a momentous growth after the Moi years of economic repression in the 1990’s. Back then Kenyan banks were closing all their branches in the country side, farmers co-operatives that served as back-up to banks, were closing in droves and there certainly was no any locally owned bank worth of note.
Since then and especially with liberalization and deregulation of the banking sector, locally owned banks like; Equity Bank, Family Bank and a myriad of other local banks have blossomed and flourished. But the 10% increase in Exercise Duty, for banking products is just scratching the surface. A more than superficial investigation into, what Kenyans are paying in taxes, levies, duties, fees and any other monies to the government is mind blogging. The legal plunder by the government of Kenya to the citizens is abhorable.
The Kenya people are choking under the yoke of burdensome taxes and an inefficient taxation policy, one ill adapted to un-locking the country’s development potential. According to PwC there are over 41 documented taxes to the government, with 5 being profit taxes, 14 labour taxes, and 22 other assorted taxes. According to the PwC report, “Paying taxes, the Global Picture 2013,’’ the report shows that the number of taxes in Kenya are above the African average of 37 and way above the global average of 27.
The country’s tax rate is 44.4%, which although it is below the African average of 57.4% is still really high, especially if you compare that with countries that have an exemplary economic development record like; Botswana at a tax rate of 25.3 % and Mauritius 28.5%. This is only a measly 0.3% points below the global average of 44/7%. These figures, especially when compounded by corruption and gazillions of business process bureaucracies only conspire to make the business environment burdensome.
The same report provides that, ‘Comparing the compliance indicators for the time to comply and the number of payments with GDP suggests that a high level of administrative complexity in the tax system is associated with less economic growth, and to a greater degree than the tax cost – this is particularly the case in relation to the number of payments indicator, implying that a high number of taxes, and a lack of electronic filing and payment facilities are key reasons here.”
This inexplicable and unjustifiably high tax rates are the bane of Kenya’s development, this in a global environment where tax havens like; the Cayman Islands, Ireland, the Netherlands and Singapore provide nominally lower tax rates provide excuses for capital flight and lower Foreign Direct Investment attractions. As Jean-Baptiste Colbert, French philosopher and Minister of Finance to King Louis XIV, once remarked that “the art of taxation consists in so plucking the goose as to obtain the largest possible amount of feathers with the smallest possible amount of hissing.”
I can tell you that there has been a lot of hissing from Kenyan’s overburdened by successive governments out to milk them of every conceivable coin from them, in the name of taxes. Well a rose by any other name would still smell as nice, and plunder be it legal or not, perpetrated by the government or not is still plunder. And Kenyans do desperately need a respite. The time for the new school of thought that high taxes are inimical to growth and development needs to take over from the school of, ‘Tax them till they die.’
Alex Njeru wrote in from Kenya
