The rich must pay their fair share of tax

A wealth report released recently by Knight Frank indicates that Kenya has more than 8,900 dollar millionaires.

This comes against the backdrop of last year’s elevation of the country to a lower middle income economy. A small class of super rich Kenyans is here with us and it is growing.

On the other hand, life seems to be getting harder for the common man, with the price of basic commodities on a steady upward trend.

As bureaucrats congratulate themselves for steady inflation rates, they forget that a steady inflation rate means prices are rising at a steady pace and biting the poor man harder every day.

Unfortunately, salaries do not increase at a similar steady pace and if the recent poor performance of listed corporates is a reliable indicator, then significant job cuts are looming.

As this is happening, the country is being treated to the spectacle of customs agents chasing after the importers of luxury vehicles, some of whom are said to evade import tax.

These are the same vehicles that currently attract lower proportionate excise duty compared to cheaper models.

Those who can afford most to pay taxes are engaging in serious tax evasion as the taxman struggles to meet revenue targets.

Consequently, the government has to burden the poor man with the cost of financing unaffordable bonds and excessive domestic borrowing that raises the cost of local loans beyond the average man’s reach.

The cost of government borrowing will be borne heaviest by the poor man, his children, and his grandchildren.

For more than 10 years now, the tax threshold for salaries has been about Sh11,000.

PROPER ENFORCEMENT

A Kenyan earning a paltry salary of Sh12,000 a month has to pay tax while another Kenyan earning millions is busy avoiding paying tax on his Sh10 million shilling car.

This salary tax threshold needs to be raised, considering the rate at which the price of basic goods has risen in the past few years.

Tax collectors need to shift their focus from squeezing the last drop out of the poor to ensuring that the rich pay their fair share.

Our tax system needs to be equitable and equity demands from each according to his ability and to each according to his need.

If the tax collectors can enforce compliance, then Kenya should be able to finance its development goals without straining itself with unaffordable debts.

The Kenya Revenue Authority must, therefore, continue on the path it has taken of ensuring tax compliance among the upper class.

A report released by Oxfam earlier this year indicates that 1 per cent of the richest men in the world have more wealth than the other 99 per cent.

The statistics are not clear for Kenya but certainly the global reality of wealth disparity is not far removed from the local situation.

The challenge is for the tax collectors to enforce existing legislation. Counties too need to enforce tax compliance.

If the people who own thousands of acres of land are made to pay their land rates dutifully, then most counties are likely to have a significant improvement in revenue collection and consequently service delivery.

This is likely to be more beneficial than the tax some counties were trying to squeeze out of chicken vendors.

NOBLE DUTY

If tenants can afford to pay rent, then certainly, landlords can afford to pay tax.

It might be argued that the rich should not pay more tax than the poor but there can be no argument as to why they should not pay fair proportionate tax.

Wealth is not created in a vacuum and there is a social cost to wealth creation. Wealth creators operate within the society and are sustained by the society.

It is more than a moral obligation to give proportionately. It is a duty and as the French say, noblesse oblige. Those in a position of privilege must accept the responsibility that comes with that privilege.  

Mr Chando is an auditor at Nation Media Group. [email protected]