The country is in the aftermath of the public protests and demonstrations, against the Finance Bill, 2024 (Bill). While there were many underlying issues that resulted in the widespread demonstrations, the trigger was the Bill which proposed a raft of additional taxes, that were widely unpopular.
The ultimate consequence was that the President declined to assent to the Bill, and sent it back to the National Assembly with a recommendation for deletion of all the clauses contained in the Bill. Other executive decisions and actions have followed, including the dismissal of the entire cabinet (but for two), and fresh nominations to the Cabinet.
Perhaps this presents an opportune moment for the nation and the government to ponder on the question of taxes, and what they represent. Taxes, tributes or levies charged by a government or a sovereign have existed since the early days of human civilization, with the earliest recorded taxation traced to the Egyptian civilization, around 5,000 B.C. In fact, Benjamin Franklin posited in 1789 that, “Nothing is certain except death and taxes.” In short, as long as you breathe, you will be taxed, and one day you’ll die – the rest, and in the between is apparently not guaranteed.
Taxes, though always a sore point between governments and their citizens, have not always been cause for unrest. However, history is awash with instances where the populace has sought for leniency from the taxing sovereign, when burdensome taxes are levied. It’s not surprising that taxes are always a central agenda in the US presidential elections, with Democrats and Republican always seeming to take differing positions on who to tax and why.
At the very basic, taxes, are levied to the governed as a basis of the social contract between the sovereign and the citizens. Without delving much into the social contract theory propounded by the likes of Thomas Hobbes and John Locke, the understanding is that the sovereign will charge the citizens taxes or levies, and in turn, provide specific services for the common good. These services include security from internal and external aggression, infrastructure such as railways and roads, healthcare, education, and a functioning legal system to deal with injustices and to enforce private contracts and rights. The sovereign also represents and protects the citizens’ interests abroad, by engaging with other sovereigns and governments on their behalf.
As long as these services are provided, the social contract remains intact, and the legitimacy of taxes is appreciated as a patriotic act. In fact, the government gets goodwill from the public to punish those who seek to evade taxes. As to how much of the above services the government should provide, and conversely, how much taxes governments should levy, the jury is still out, and schools of thought abound.
We have to acknowledge that over time, as tax systems become more complex, the role of taxes in governance has evolved to cater for different goals. For instance, some taxes such as excise duty are generally levied to discourage public behavior, while other taxes are levied or exempted, to drive economic or public policy, such as exemption of tax on education or healthcare equipment, or waiver of taxes related to tourism.
However, despite the evolving nature of what and who should be taxed, the very basic foundations of the why of taxation have not changed. On the basic, if you’re taxed, you should expect decent government services, and a form of representation in governance.
In the Kenyan case, it seems that the population has little faith in how this social contract has been enforced, and the quality of the governance, and considers the steep taxation incongruent with the basic roles of government and representation.
While we chart the way forward as a nation in the wake of the protests, perhaps it is an opportune time for the government to clarify its tax policy, and for all parties involved to go back to the basics, or rather, the foundations of the pervasive relationship between taxes and governance, and the social contract between the taxed and the governed.
The writer is the Founding & Managing Partner at Mukiti Advocates LLP, and a former tax advisor KPMG Kenya. Email: timothy.mukiti@mukitiadvocates.co.ke
This article was published in the Business Daily on 25 July 2024.
