18 September 2018

Kenya: MPs Must Tackle Fuel VAT Debate Soberly

editorial

The decision over the controversial fuel tax and a wide array of austerity measures to plug a huge Budget deficit lies with Parliament, which has convened a special session this afternoon to unlock the impasse that threatens the nation's economic well-being.

MPs must rise to the occasion and confront the brutal reality on the state of the economy dispassionately and without recourse to party or regional considerations.

The facts of the matter are pretty clear. A proposal by the National Treasury to introduce 16 per cent value added tax on petroleum products was ill-advised and poses a serious challenge to the economy.

Which is the reason President Uhuru Kenyatta offered a counter-proposal to halve the levy -- in effect seeking to meet the public half-way. But this has not gone down well with Kenyans.

FINANCE BILL

President Kenyatta has argued that the MPs chose the easier path when they passed the Finance Bill 2018, which vetoed levying of value added tax (VAT) on petroleum products.

That the MPs cannot run away from confronting harsh realities and making difficult decisions. Thus, his argument is that consumers must pay some levy for fuel -- that it is not possible to run the economy without seeking alternatives, even if that is going to be painful.

Our argument has always been that the 16 per cent VAT was unjustified. Reducing it to eight per cent is not any better. This must now be debated soberly. Taxation and more taxation is not the panacea for budget gaps. Alternatives must be found, which, in our view, must start with cost cutting and prioritising expenditures.

BUDGET CUTS

This why the next conversation about budget cuts makes sense. And in this context, the President made a raft of proposals to raise additional funds to meet the budget deficit.

He itemised vote heads to slash, among them the Constituency Development Fund that is managed by MPs.

In the list are recurrent costs of travel, workshops, salaries and social subsidies as well as capital projects such as the Konza Technology City and the Digital Literacy programme.

In essence, the government must look inward and ask tough questions: What are the priority areas?

EXTREME COSTS

What can we deliver in the short- and long term? Such conversation must be divorced from politics, which really is part of the problem afflicting the country. Most decisions were political -- poorly thought out but quickly executed to appease the masses but at extreme costs.

We urge all the MPs to look at the proposals critically and make realistic decisions. We would abhor a situation where they debate with self-interest -- like shooting down the proposals in their entirety just because CDF is being slashed. Importantly, they should give productive proposals to move the conversation.

Kenya

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