Why taxpayers don't make loud noises about corruption

Times Tower, the headquarters of the Kenya Revenue Authority, along Haile Selassie Avenue in Nairobi. PHOTO | SALATON NJAU | NATION MEDIA GROUP

What you need to know:

  • Those who pay indirect tax may not feel the pain or even relate theft of public funds with their own money.

  • To them, it is mali ya uma (public funds).

Last week, the government held a meeting on corruption and accountability. The Kenya Revenue Authority (KRA) held the 2nd Annual Tax Summit. The theme of this summit was Kenyan solution to Kenya’s challenges: taxation as a catalyst for development. The summit had several topics for discussion including one on identifying innovative approaches to expanding the tax base in Kenya.

What was missing in both the corruption and accountability meeting; and the KRA summit was a discussion on taxation as a possible solution to corruption. There was not even a discussion on why taxpayers do not make loud noises on corruption yet corruption in the public sector is ‘theft’ of their money.

The two meetings proceeded on without reference to one another. There were no substantive discussions on how increasing the number of taxpayers can lead to better watch on corruption.

There were no discussions on how taxpayers can organise to prevent theft of their money. This remains a missing link in our discussions on corruption and taxation in Kenya. Unfortunately, it is not in Kenya alone where policymakers fail to adapt taxation as a solution to corruption.

MORE CLEARLY

With hindsight, perhaps former President Mwai Kibaki saw this relationship in his first years of office more clearly than anyone else has done since then. In one of the few public rallies he addressed after coming to office in 2003, he spoke candidly about expanding the tax base so as to support growth and development. But he warned the old men and women attending the meeting: Usipomuona jirani, ujue amekamatwa kwa sababu hajalipa kodi (if you do not see your neighbour, you should know that he/she has been arrested for defaulting on payment of tax). And in another meeting, he warned people ‘not to make noise about government development projects’ if they do not pay tax. He said it is a big joke to do so. At the time President Kibaki was making this statement, total tax collection averaged about Sh229 billion. KRA was also putting in place measures to enhance revenue collection. These included consistent messages asking taxpayers to file their annual tax returns with KRA at the end of every financial year.

IMMEDIATE EFFECT

President Kibaki’s statements had an immediate effect. There were very long queues of taxpayers returning their completed tax forms at the Times Tower and other collection points. Small and big audit firms had a lot of business coming from many people wanted a review of their taxes or advise on how to file their returns. This was unprecedented. Tax collection also increased by 57 per cent in just two years of making this statement.

Revenue increased alongside several important observations. People became more vigilance on government projects and on matters corruption. People would openly discuss the quality of roads and other projects. They would petition the relevant ministers to act if they identified anything wrong. People would petition their MPs to ask questions on some of the projects in Parliament while others would hold street demonstrations denouncing the contractors or the quality of the project.

There was increased public interest on what was happing in government ministries and departments as well as the parastatals. Whistle-blowers were up with evidence of what was happening in procurement of government services. The media and civil society groups also exerted enormous pressure on the government to improve on transparency in the procurement of government services.

GROWING INACTION

Of course activism against corruption reduced with growing inaction on the part of the government. The emergence of Anglo Leasing and other scandals immediately undermined the public psyche against corruption. All the same, people continued to queue to file returns at KRA offices. The point President Kibaki was making was simple. Increased government revenue can lead to the government implementing many development projects and that citizens should make noise when they see something going wrong with these projects. This certainly helped the government to collect revenue. But the government’s failure to respond to complaints by public on corruption reduced people’s interest to fight corruption.

But the noise and attendant vigilance against corruption in Kenya are weakened by the fact those who pay tax in this country are relatively few compared to the total number of Kenyans engaged in gainful economic activities and who should be paying tax. Civil servants, public servants, and teachers as well as those employed in the corporate sector certainly file their returns. Their taxes are paid at the point of employment. In 2015 about 1.5 million were registered on the KRA’s iTax. Most of these are the PAYE lot.

CORPORATE TAXPAYERS

Of course there are corporate taxpayers. They are organised in many ways. But the noise they make against corruption is inaudible. Recent times have also witnessed a clear link between corruption in the public sector the private businesses.

Certainly civil servants cannot make noise on corruption. This is not because they are civil but because they do not relate their PAYE tax with the theft of funds in their offices. Many are also the authors of corrupt practices in their ministries. They cannot act on themselves. Other public servants behave the same way; they cannot bother because it does not concern them or because they are deeply engaged in it.

On the other hand, the ordinary people engaged in small businesses have had no motivation to file tax returns. And when they pay for different licences including government office, the assumption they make is that these are the usual fees to the Government county or national. Rarely do they make a link between the fees they pay and the services they get.

DIRECT PAYMENT

The war against corruption cannot pick momentum because the number of citizens paying tax directly to authorities is too small to count. Also a majority of those filing their taxes to authorities are the usual civil servants and other public servants who are either cowed into silence by the rules of their offices or are the authors of petty corruption which they use to get back the tax they have paid.

There are more than 10 million Kenyans out there who are engaged in gainful economic activities but have no direct relationship with taxation. Some of the businesses operate in an informal manner; the owners do not require any licenses. Others are so fearful of the taxman they hide far away to be netted.

Were all these people to pay tax and organise to demand proper use of their money, they would deter corruption from taking place. They would see a clear link between corruption and the money they pay to the government tax authorities.

The government of course must begin by showing a determination and commitment to deal with corruption before these millions of citizens commit themselves to paying tax. People have to see action on the part of the government.

CLEAR LINK

When many of these people pay tax, it will not be business as usual on matters corruption. All of them will be making a clear link between their money and theft of money in government offices.

The point here is that tax leads not only to increased revenue for the government to carry out services but also leads to people getting interested in how the government is using their monies. Governments everywhere rule in their own interests and may collect revenue to put it to use in their own way and in particular in a manner desirable by only a few.

But government can be motivated to put money to proper use when the taxpayers begin making demands, in an organised manner, on how they want their money used. Government can do the right thing only when they face the pressure to do so. This pressure can only come from those who feel the pain of theft of public money because they can relate it to the tax they pay directly to the government authorities.

FEEL PAIN

Those who pay indirect tax may not feel the pain or even relate theft of public funds with their own money. To them, it is mali ya uma (public funds). This has relationship with the money they pay as tax. If millions of those involved in various economic activities were to be filing tax returns directly to KRA, they would certainly well organize into strong groups to know what is happening with their money. Anti-corruption efforts would resonate with individuals because they would see corruption as theft of their own money. They would put pressure on the government to act on corruption.

But with few people making efforts to pay tax, this link with corruption will be hard to establish. Corruption will remain a matter of theft of mali ya uma.

 

Prof Karuti Kanyinga is based at the Institute for Development Studies at the University of Nairobi.