Tax cut not an option as Kenyans seek immediate reprieve from Yatani

The prevailing fuel crisis perhaps paints a clear picture of the tough economic times facing many Kenyans, hard-hit are low-income earners who now seek quick reprieve from Ukur Yatani who will present his final budget as the National Treasury Cabinet Secretary Thursday under the Jubilee government.

In the last two weeks, consumers countrywide have been forced to withstand long queues to get fuel, a critical commodity whose cost has also risen significantly within a year.

According to the Kenya National Bureau of Statistics (KNBS), retail prices for a litre of kerosene, petrol and diesel have risen 5.8%, 9.6% and 7.3% respectively within one year to March 2022.

It is a cost many people in the transport sector have had to bear as the alternative is often to pass it down to consumers.

Muchiri, a father of three draws his income from taxi business where he is a driver in Nairobi. For the last one year, he tells me, operations in the sector have been unbearable.

He says these days, despite starting work as early as 4AM, he barely makes any profit given that the little he makes he has to split with the car owner.

Muchiri, a father of three draw his income from taxi business where he is a driver in Nairobi. For the last one year, he says income has gone donwn to increases in fuel prices. PHOTO | Ronald Owili

“If I look at the 10 hours I work and look at the return, I get disappointed because the money I make I have to fuel the car, split with the car owner and I also have a family to feed. These days even if pay Kshs. 1000 for fuel, it has no return because the fuel is too expensive,” Muchiri tells me.

As CS Yatani outlines tax measures to finance the Kshs. 3.3 trillion budget, Muchiri calls on the treasury boss to prioritize the needs of the workers in the sector especially now that fuel has skyrocketed.

He says, a key consideration should ensure the establishment of law that makes it possible for taxi drivers to be paid per kilometre.

“It is only the morning that we get business because there are people who order cabs to get to the airport or SGR. But most of the time because the cost of everything has gone up, people opt to use cheaper means like matatus as some have also lost their income because of COVID-19. I would like the payment of drivers to be standardized,” he adds.

However, Muchiri’s is not alone in his predicament. Maurice Osowo a head chef at one of the restaurants in Nairobi feels the economic situation in the country has been unbearable.

He says business has barely recovered after suffering heavy losses as a result of COVID-19 pandemic and the ricent price hikes have aggravated the situation.

For instance, the retail price for a 2kg of wheat flour has risen 17.7% year-on-year while cooking salad has also risen by a massive 35.2%, similar to cooking gas whose retail price for a 13kg has surged 38.1%.

inflation
PHOTO | KBC

According to Maurice, he has barely recovered from covid effects as he currently operating at 40% capacity compared to the pre-covid era.

“The cost of living has really gone up. We need reprieve especially on fuel because if prices of goods go up, you are told it is due to an increase in fuel prices. The government needs to address this urgently because as much as we are in business, we also try to keep those employed in their jobs,” says Osowo

As a result of rising commodity prices, the price of food in restaurants has gone up by at least 14% as restaurant owners strive to remain in operation and improve their margins.

“The government needs to reduce taxes on essential goods a common man uses. This will cushion many from the hardships we are facing. They need to strike balance between which goods need to be taxed and which need reductions,” suggests Osowo.

Are tax cuts an option?

While many Kenyans have called for tax cuts such as a reduction of Pay-As-You-Earn to 25% and Value Added Tax to 14%, experts have warned that Kenyans should not expect immediate tax cuts amid revenue and expenditure pressures.

“We still expect there will be newer tax proposals. However we expect a push back because there are usually those annoying tax proposals that come in every budge and I believe there will be those pushbacks even after the budget presentation,” says Churchill Ogutu, Economist at IC Asset Managers.

Christine Kahema, Director at Alpha Tax and Business Advisory Services on the other hand says, “We may not see a reduction in taxes and maybe some tax heads might not be touched but I am hoping that we will be able to see ways in which the CS can come up with ways to raise taxes. Like a couple of years ago, they introduced the digital service tax and that has actually generated some more income because we had a lot of business going towards the digital space that was not subjected to taxation.”

Treasury is also expected to recommend measures that will ensure the tax base is broadened as well as announce policies that will spur job creation after an estimated 1.2 million Kenyans lost their jobs as a result of the pandemic.

  

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