A few weeks ago, a national conversation sparked by the high cost of food prices brought to the limelight our failure as a nation to concisely prioritise what is important to the citizenry. The constant rise in the cost of basic commodities is worsening the already bad living conditions following the Covid-19 pandemic. This led to uproar from different quarters, forcing a State House statement that acknowledged the worsening situation.
However, the government's position left the country hopeless and equally shocked at the self-imposing ignorance of those in positions of power, who cite a 24-day Russia-Ukraine war as the push factor behind the rising cost of basic commodities.
An in-depth look into the situation will open our eyes beyond the alleged external factors. Particularly, internal political and fiscal policies must be apportioned the biggest share of our current challenges. For instance, our taxation regime has largely contributed to the rising commodity prices.
The adoption of the Finance Act, of 2021, led to the reintroduction of levies on a range of consumables in a bid to widen the tax base to fund the 2021/22 Budget. Among the notable effects of this policy change was the introduction of VAT on hitherto zero-rated liquefied petroleum gas (LPG). Until then, the cooking gas was widely affordable; mainly due to that, in a record eight months, the price has tripled.The situation is replicated in other basic consumables, such as cooking oil, bread, sugar, flour, wheat and milk, which are no longer affordable, subjecting more households to poverty.
The “2020 Comprehensive Poverty Report” by the Kenya National Bureau of Statistics (KNBS) shows 15.9 million Kenyans live in abject poverty while 23.4 million (53 per cent) are multi-dimensionally poor.Muting external factors, the country has not done enough to safeguard food security and affordability of basic goods. Ours is an internal failure with economic implications, fundamentally a policy abdication by the political class.
This draws our attention to the policy-making body, Parliament, which extemporaneously passed the Finance Act, 2021, without considering the ramifications of the new tax regime. In this regard, the 12th Parliament will go on record for excelling in its failures to protect the mwananchi from the grim economic situation.
Nevertheless, it is not too late to amend the Finance Act, 2021, to make basic commodities universally affordable. This can be done at the National Assembly or by the National Treasury Cabinet Secretary through special provisions for tax exemptions.
Consumption tax sees the poor relatively more highly taxed; all their income is spent on basic consumables. Tax policies should be based on fair taxation with a broad tax base on non-essential goods and services. As it is, there are no tax-free goods for the poor — or are tax exemptions a preserve of the multinationals and other corporate bodies?
Mr Kosgei is a social entrepreneur advocating for youth, education and the environment. jeffkibe@gmail.com