Salary stub tells stories. Additional deductions to help cover Kenya’s new funds for affordable housing and health insurance. More money was reduced for donations paid by the National Social Security Foundation and the increase in tax rates.
In just a few months, Kenyans earn $45,000 (about $350) a month, and their paid income shrank by 9% to $262.
Pay for employees of Shining Gope, a Kenyan-based nonprofit organization, to survive:
June 2024
“People who are paid are crying,” said Kennedy Odede, founder of the Kibera Slum Self-Help Association in Nairobi.
The pay raise tax is part of President William Ruto's urgent demand to raise revenues to keep the government running and pay off Kenya's stunning foreign debt.
A new excise tax is imposed on sugar, alcohol and plastics. The tax rate on business profits doubled to 3%. Government earnings transfer fees, telephone and internet data services rose 15% to 20%. The tax on each import, including essentials such as wheat and cooking oil, is used for railway development, increased from 1.5% to 2%. Some waivers for retirees were cancelled. The list continues.
Tax increases have never been popular. However, the impact on countries like Kenya is relatively low and debt is particularly serious. Harum-Scarum borrowing and spending over the years combined with the COVID-19 pandemic, high interest rates and economic effects of inflation have boosted Kenya’s debt to $80 billion.
Kenya must use nearly 60% of its revenue to repay its loans. In Africa, this is a common problem, and many countries spend more on interest payments than on health or education.
Meanwhile, countries need billions of dollars in new financing for basic health care, schools, clean water, sewage systems, paved roads and climate-related disaster mitigation.
Keeping the country's financial situation organized is a prerequisite for long-term growth. However, there are limited options to increase this income in Kenya, where 40% of its 52 million people live in poverty, while the youth unemployment rate is estimated at 25%. Small businesses and survival agriculture make up most of the economy.
According to an estimate, 83% of the country's labor force is engaged in tax collection, including jobs as hairdressers, maids, street sellers and drivers.
This means that the population of the effective population in the business that records salary reduces most of the tax burden.
“Our purchasing power has indeed declined due to taxes,” said Mr. ODEDE, who worked for Shining Hope or Shofco, a nonprofit organization, said two decades ago.
The country's economic crisis has driven the lower value of shillings related to the dollar, meaning import costs have soared. Six months ago, a thousand shillings ($7.73) six months ago were enough to hold cooking oil, flour, rice and sugar. Now, she can only buy sugar and flour at the same amount, she said.
Last year, the proposed tax increase triggered deadly riots in the capital Nairobi. More than 50 people were killed and part of the parliament caught fire. The government temporarily retreated, only after a few weeks it lowered many additional taxes and fees again.
The government has been talking to the IMF about new lending options. The fund may require additional assurance that the Ruto government will cut spending and increase revenue. But you can't squeeze a lot of water out of a twisting towel.
Behind the general dissatisfaction with a particular policy is the deep cynicism about the ability of the government to repay debts or provide basic services.
Regular Reports of the Comptroller of the Country,,,,, Nancy Gathungu, detailed examples of corruption or mismanagement. She said that at the end of last year, the government was unable to account for more than $1.24 billion in debt payments. In March, Ms Gathungu reported that a $64 million government-funded Covid-19 vaccine was never launched. Critics are also confused by the extravagant spending of government officials.
“Ruto said we need to pay off our debts, but there is no public service to show,” said Tatiana Gicheru, a student at Strasmore University in Nairobi. “I can't walk into a government hospital and get any services.”
Ms Gicheru, 21, sat outside a Java house outside a coffee chain in Nairobi and drank lattes with her friend Jewel Jewel Ndung'u. Ms. Ndung'u, 25, graduated from Strathmore two years ago and has been looking for full-time jobs as an analyst or developer. She said she applied for 73 jobs from September to January. She got six callbacks and no job opportunities.
Where is affordable housing? Where are health services and public transportation? asked Ms. Ndung'u. Ms Gicheru added: “The system is suddenly crashing.”
Ms Ndung'u said she would rather see Kenyans pay their debt directly to China's largest bilateral creditor, China, by using digital fundraising platform M-Changa, rather than donating to the government through taxes and trusting the money.
As taxes rise, Kenyans become more angry at the lack of public services. In November, a group of people were frustrated by the dilapidated roads in Syokimau, a few miles south of Nairobi’s main airport, forcing their council representatives to cross the flooded muddy streets.
In the southwest of Nairobi, it is Kibera, considered the largest urban slum in Africa. Its muddy streets are filled with shoppers, pedestrian commuters, hawkers, fraudsters, students in neatly dressed uniforms, and residents who fill the bright yellow Jerikas with clean water on currency-operated faucets. They navigate around the running vehicle by trash and occasional raw sewage and motorcycles and bikes. Kibera does not have government-funded health services.
The sloping skyline features plasterboard, rusty roofs and a shaky house of a forest of accidental poles and wires, and illegal power connections hang like Christmas ornaments.
Benedict Musyoka, the youth community organizer of Kibera, said a young man told him, “I won’t get married.” Earn enough hard enough to support himself, let alone with his wife and children. This man has a degree. “You are working hard to collect taxes, we have no job,” Mr Musyoka said.
With Kenya’s debt levels, there are no easy options, said Thys Louw, portfolio manager for ninety-one London-based global investment firms. He said it is crucial to expand the tax base – bringing more businesses and people who currently don't pay taxes into the system. And there are too many exemptions.
In Kenya, taxes account for 16.6% of the country's total output, according to the Organization for Economic Cooperation and Development. In Africa, the share is not uncommon, but half of what is found in wealthy industrialized countries.
June will be the year since the riots and talks of commemorative gatherings and further protests began to bubble. This is also when the government will complete the new budget, which may include further tax increases.
Many people like Ms. Okumu of Shofco are worried about more riots. People work hard and hope that “tomorrow they will see the light.”
“But when tomorrow comes, it's still dark.”
Abdi Latif Dahir Contribution report.
