SIN TAX AND THE ECONOMY

The government is about to read its annual budget. This being a new administration, I was expecting some new creative measures. However, what I am hearing is more of the same things that have always left this economy crying. Its more about raising different taxes rather than giving incentives to industries to produce and trade more.

We might expect a lot from a new administration but truth be told, as long as it’s the same guys working at treasury then we will never have any meaningful changes in our economy. It will always grow at minis cure rates and will leave more people hungry than those who are fed.

Today I want to dissect how Sin Taxes have killed a whole industry. I will specifically deal with the alcohol and beverage industry. Since time immemorial, governments in Kenya have increased taxes on alcohol at every budget statement. This has led to prices of alcohol and other non alcoholic beverages increasing year on year. The question to ask ourselves is, has these tax increases led to additional revenue for government and is it sustainable?

The answer is a big NO. These incremental taxes have led to stifling of growth in the alcohol business as well as the wider entertainment and tourism industries. Today there are fewer customers in the formal bars as less people can afford a beer or a decent spirit. While the number of bars may have increased over time, this is purely attributed to the ingenuity of Kenyans in opening multi services businesses that offer diverse goods and services all under one roof and alcohol becomes just one of the multiple revenue streams. The days of opening a bar and surviving on just that are long gone. Secondly, although there seems to be a multitude of bars all over, most of them are unregulated and downright illegal. The mainly sell cheap and illegal drinks that are not only a danger to human health but also do not contribute anything in form of tax revenue. You have seen the ever rising cases of ethanol busts where un-customed ethanol find its way into our borders illegally. Worse still you have heard of the cases of methanol poisoning leading to deaths and blindness of victims.

The formal alcohol industry contributes to a lot of sectors. There is the sorghum farmer, there is government with its taxes, there is the film industry through advertisements, the creatives, the hotel accommodation and tourism industry, there is the print industry through paid advertisement pages, the is the distributors and bar traders, there is construction industry through development of entertainment joints, there is the transport industry as alcohol has to be transported, the food industry as partakers have to eat and of course the many other related services that people buy when having alcohol some which cannot be mentioned. The moment you kill or slow down this industry by burdening it with taxes and fees, all these people suffer. There is less customers and less revenue to go round for everyone. Taxes go down, companies reduce their marketing and advertising budgets, the farmers suffer, traders close their distributor ships and bars, restaurants and hotels, landlords and developers suffer, jobs are lost, there is less product to transport thus less need for lorries, vans and drivers. Creatives suffer as well as there are fewer entertainment gigs being organized. In all this, an underground illegal and unregulated alcohol industry arises as people still have to drink. This illegal industry will never support all the above in a big way as it has to remain underground. For one it will never advertise and worse of all it fuels corruption. Higher taxes also result into higher prices and therefore fuel inflation.

These are the simple repercussions of overtaxing an industry. For a product that does not add anything to the body other that creating a feeling of euphoria, alcohol is highly taxed at manufacturing level. Worse still, at the bar level it is taxed even further. There is the discriminative liquor license tax at county government level. Why there is a need to levy a liquor license and no tea hardware goods license for example is beyond my understanding. Do not forget the bar owners still pay for the single business license, health permit license, music copyright license, tourism regulatory authority license, tourism levy, Nita levy, income tax, vat and other statutory deduction. There is also all the other business expenses to contend with including rent where applicable, dstv, internet, salaries, electricity, water, security and general maintenance. It has therefore become impossible to run a successful alcohol selling entertainment joints with the rising prices and dwindling customers numbers while paying all these taxes and levies. This is especially true post Covid- 19 pandemic. The slowdown has affected everyone and many alcoholic businesses have closed shop and jobs lost especially those that are on rented premises.

The president and his deputy have recently talked of reducing the number of bars. Their approach however betrays their lack of understanding of the industry or their unwillingness to appreciate the crucial role of this industry. For one, they should be talking of promoting the formal industry to discourage the informal and illegal underground business by taxing the former less and punishing the later severely. They should review some of these overbearing taxes and levies while streamlining issuance of relevant licenses. The liquor license for example should be eliminated. It is discriminative and unconstitutional. Why punish someone for opting to sell one product over the other. We cannot all sell nails.

The government has to reverse this trend. This is just an overview of one industry. Many other sectors are suffering the same predicaments. The manufacturing industry is hard hit by high energy prices again partly caused by high taxes on electricity and fossil fuels. Import taxes are over the roof. Communication and banking services are becoming more expensive again because of rising exercise duties and interest rates. We need to enable people to produce and trade easily enough by removing these bottlenecks that bedevil us. This unemployment is not good for anyone. When we are left with nothing to eat, we will eat the government

This article should be read by all.
Ume copy kutoka site gani?

Wacha DP amalizane na ethanol, hii ingine ni polepole

This is my own and I give you permission to copy

It isn’t possible to tax your way to prosperity. Kama unataka kukata taxes you target output not inputs.

Nchi ya wezi na walevi

How can the same guys who dug us into a hole be the same ones expected to get us out of it?

Anyway, for the sake of my own sanity let me give them the benefit of doubt.

I think we have very lazy technocrats at treasury, people who do not think deeply of economic policies and their impact. Our taxation system is unnecessarily complicated for no reason at all. Taxes should be as clear as day and easy to understand. You cannot for example know what cess you are expected to pay if you move a product from point A to B in this country. Anything goes in between. Also, a multiplication of levies and taxes all over. Why pay for example tourism levy, then again tourism regulatory authority licence. And of what benefit are these levies and licences to a business

Our technocrats have a combined IQ of an old door knob. Beyond taxes and stupid levies, hawana alili ya kukuza uchumi. They even levy excise duty on things we don’t manufacture effectively increasing the cost of doing business. Maumbwa sana hao watu.

You have forgotten that most of have a degree to be employed in those useless offices.

If you took a banana and tucked it inside your pants can it thus be said that you have a big penis?

Kra certificate and tax clearance certificate should be made mandatory requirement to access all gavament service, from getting an ID,kufungua bank account , telephone number line ,mpesa,land registry office, passport, kupeleka mtu shule helb access, good conduct,kuuza ngombe kichinjio, vying for political office everything ya serkal Leta Kwanza valid tax clearance certificate na kra pin certificate,that way we shall achieve tax equality ,Sio @Karoga kulipa million s in taxes na rustlers Kama @Gaza halipi chochote yet we get the same gavament service s.

Why pay tax while the leaders don’t pay. Two can’t play the game. Why pay for it to be stolen.

Leo unasema serikali itoze ushuru jana ulisema serikali iuze nhif watu waache kutegemea GK. Which is it? Pick a line and hold it ama unyamaze

Following

Nhif na paying taxes aren’t related in any way,you should pay tax but be given the option of choosing which health insurance company plan best fits your needs and medical situation.

Stop lamenting about theft , tafuta njia ya kuiba hata wewe!!!

Some of us here were brought up through hard work. Mzazi hakuiba ndio nisome why should I steal?

Government is a form of insurance