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Pain of new taxes being felt across East Africa

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By ALLAN OLINGO
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By JAMES ANYANZWA
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Regional governments have moved to squeeze every penny possible from their citizens by introducing new taxes on consumer goods and other essential commodities to fund their ballooning budgets and to service development loans.

From kerosene to toothpaste, toilet paper, toothbrushes, sweets, chocolates, books, mattresses and even Internet access, governments are imposing taxes, measures that are hurting the poor further.

This is coming at a time when the region’s governments are finding it increasingly hard to secure external funding to reduce their budget deficits. The governments have thus resorted to painful taxation measures, even as they institute austerity in their spending, in the face of missed revenue targets.

In June, as finance ministers presented their annual budgets, East Africa’s three top three economies announced plans to borrow more than $12 billion to finance their budget deficits, even as their public debts rose amid concerns over sustainability.

Kenya had the highest borrowing plans of $5.58 billion, followed by Tanzania at $4.6 billion and Uganda at $2.4 billion, with a huge chunk of this being sourced from external financiers. However, this seems to have slowed down, as the reality that they needed to cut down their spending sank in.

Now, they are raiding their citizens’ pockets to plug the expected shortfall and deliver on their promises.

Kenya is already finding it difficult to fund the operations of its expanded government, amid falling revenue collections, rising public debt and an underperforming economy.

On Tuesday, Kenyan legislators voted to reduce this year’s $30 billion budget by $376 million after it emerged that the country will not collect enough revenues in an economy that grew only 4.9 per cent in 2017, the slowest in five years. This cut, however, fell short of the $546 million that National Treasury Cabinet Secretary Henry Rotich had recommended.

On Thursday, legislators voted to introduce 8 per cent VAT on all oil products, and President Uhuru Kenyatta signed it into law a few hours later.

The country’s total expenditure has been rising over the past 10 years, from 22.3 per cent of GDP in the 2008/2009 fiscal year to 27.5 per cent of GDP in 2016/2017.

The situation worsened after it adopted a devolved system of government in the 2013/2014 fiscal year. The devolved system ushered in county governments and increased the number of Members of Parliament to 418 from 222, among other constitutional office holders.

It is argued that with Kenya’s current revenue levels, and the increased spending pressures as a result of the devolved system of government, Treasury is financially constrained and has to survive on borrowing.

Parliament has in the meantime voted to cut spending on infrastructure projects such as roads to ensure the government survives this rough patch.

An attempt by the government to curb revenue leakages by abolishing and merging poorly performing state corporations was met with resistance, largely due to institutional wrangles, lack of political will and the National Treasury’s unwillingness to take the lead in pushing through the reforms.

Kenya’s 2018/2019 budget is 29 per cent more than the revised budget of the 2017/18 fiscal year but a huge chunk of it — estimated at 25 per cent — is going towards repayments of the national debt, which is currently estimated at Ksh5 trillion ($50 billion), while nearly 50 per cent of this budget is expected to go towards salaries for public officers.

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According to economists at the Nairobi-based think tank Institute of Economic Affairs, Kenya’s overall revenue mobilisation in relation to target has continued to underperform largely due to a weak economy.

They said the government should enforce austerity measures to stem the increasing expenditure bill especially the rise in recurrent expenditure, including cutting non-core expenditure items such as travel and conferences.

“The government should be wary of a subdued economy. Revenue performance is strongly linked to economic growth and despite some positive signs of economic rebound there are a number of policy concerns that may affect economic growth and hence undermine revenue collection,” says the think-tank.

It is feared that the subdued credit to the private sector, especially to the small- and medium-enterprises, which is blamed on interest rate capping, could stifle economic growth this year.

Kenya’s economic growth also remains unpredictable and may further be dampened by external factors such as rising international oil prices.

Mr Rotich introduced new taxes in an effort to fund his $30 billion budget for the 2018/2019 fiscal year, as the country faced budget financing challenges, compounded by last week’s expiry of an International Monetary Fund’s $1.5 billion stand-by loan facility for balance of payments support.

The fiscal deficit reduction targets were set by the IMF when it granted a precautionary credit deal two years ago.

Treasury had budgeted for $347.74 million to be collected through a 16 per cent value added tax on all oil products, but President Uhuru Kenyatta recommended that it be halved to 8 per cent to allow Treasury to collect $175 million.

Other new taxes include an increase in the price of kerosene by $0.18 per litre to stop adulteration; excise duty of $0.2 per kilogramme of confectionery, and a 20 per cent levy on the charges banks levy on customers for money transfers.

In Uganda, the taxation regime for select food and non-food items of between 25 per cent and 60 per cent in this year’s budget rattled taxpayers. But it was the introduction of the social media tax in July, through which the Kampala administration aims to raise $103 million annually, that sent the clearest indication that the government was desperate for money.

“We are so far pleased with the impact of the tax measures introduced in the 2018/19 financial year budget. The increase in taxes is working. We are absolutely okay with what we did. After missing its tax collection targets by $160.2 million for the financial year 2017/18, the Ugandan Revenue Authority is now back to doing well,” Uganda’s Finance Permanent Secretary Keith Muhakanizi said.

Kampala has also pushed for the introduction of a 30 per cent income tax on takeover deals by private and listed companies, targeting major acquisition deals.

This move comes after years of generous income tax relief that helped investors pull off big ticket acquisitions on the stock exchange without suffering the burden of huge income tax bills.

“It is also obvious that the government is desperate to collect more taxes to finance its budget. Some investors will be affected by this tax measure but those who are very aggressive on investment exit plans may not be affected,” Plaxeda Namirimu, a tax director at PwC Uganda, told The EastAfrican in an earlier interview.

Tanzania, which is also staring at a budget shortfall of 5.3 per cent of GDP, introduced new taxation measures as it sought to fund its $14.21 billion budget.

Finance Minister Dr Philip Mpango did not change the fixed tariffs on locally produced non-petroleum excisable products including alcohol, soft drinks and tobacco but increased the excise duty rates of imported non-petroleum products by 5 per cent.

Dar es Salaam also replaced the Paper Tax Stamp from September this year with the Electronic Tax Stamp, which it said will enable the government to obtain production data from manufacturers in real time.

Dr Mpango is also pushing to widen the tax base by formalisation of the informal sector.

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Public officers above 58 years and with pre-existing conditions told to work from home: The Standard

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Head of Public Service Joseph Kinyua. [File, Standard]
In a document from Head of Public Service, Joseph Kinyua new measure have been outlined to curb the bulging spread of covid-19. Public officers with underlying health conditions and those who are over 58 years -a group that experts have classified as most vulnerable to the virus will be required to execute their duties from home.

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However, the new rule excluded personnel in the security sector and other critical and essential services.
“All State and public officers with pre-existing medical conditions and/or aged 58 years and above serving in CSG5 (job group ‘S’) and below or their equivalents should forthwith work from home,” read the document,” read the document.
To ensure that those working from home deliver, the Public Service directs that there be clear assignments and targets tasked for the period designated and a clear reporting line to monitor and review work done.
SEE ALSO: Thinking inside the cardboard box for post-lockdown work stations
Others measures outlined in the document include the provision of personal protective equipment to staff, provision of sanitizers and access to washing facilities fitted with soap and water, temperature checks for all staff and clients entering public offices regular fumigation of office premises and vehicles and minimizing of visitors except by prior appointments.
Officers who contract the virus and come back to work after quarantine or isolation period will be required to follow specific directives such as obtaining clearance from the isolation facility certified by the designated persons indicating that the public officer is free and safe from Covid-19. The officer will also be required to stay away from duty station for a period of seven days after the date of medical certification.
“The period a public officer spends in quarantine or isolation due to Covid-19, shall be treated as sick leave and shall be subject to the Provisions of the Human Resource Policy and procedures Manual for the Public Service(May,2016),” read the document.
The service has also made discrimination and stigmatization an offence and has guaranteed those affected with the virus to receive adequate access to mental health and psychosocial supported offered by the government.
The new directives targeting the Public Services come at a time when Kenyans have increasingly shown lack of strict observance of the issued guidelines even as the number of positive Covid-19 cases skyrocket to 13,771 and leaving 238 dead as of today.
SEE ALSO: Working from home could be blessing in disguise for persons with disabilities
Principal Secretaries/ Accounting Officers will be personally responsible for effective enforcement and compliance of the current guidelines and any future directives issued to mitigate the spread of Covid-19.

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Uhuru convenes summit to review rising Covid-19 cases: The Standard

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President Uhuru Kenyatta (pictured) will on Friday, July 24, meet governors following the ballooning Covid-19 infections in recent days.
The session will among other things review the efficacy of the containment measures in place and review the impact of the phased easing of the restrictions, State House said in a statement.
This story is being updated.
SEE ALSO: Sakaja resigns from Covid-19 Senate committee, in court tomorrow

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Drastic life changes affecting mental health

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Kenya has been ranked 6th among African countries with the highest cases of depression, this has triggered anxiety by the World Health Organization (WHO), with 1.9 million people suffering from a form of mental conditions such as depression, substance abuse.

KBC Radio_KICD Timetable

Globally, one in four people is affected by mental or neurological disorders at some point in their lives, this is according to the WHO.

Currently, around 450 million people suffer from such conditions, placing mental disorders among the leading causes of ill-health and disability worldwide.

The pandemic has also been known to cause significant distress, mostly affecting the state of one’s mental well-being.

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With the spread of the COVID-19 pandemic attributed to the novel Coronavirus disease, millions have been affected globally with over 14 million infections and half a million deaths as to date. This has brought about uncertainty coupled with difficult situations, including job loss and the risk of contracting the deadly virus.

In Kenya the first Coronavirus case was reported in Nairobi by the Ministry of Health on the 12th March 2020.  It was not until the government put in place precautionary measures including a curfew and lockdown (the latter having being lifted) due to an increase in the number of infections that people began feeling its effect both economically and socially.

A study by Dr. Habil Otanga,  a Lecturer at the University of Nairobi, Department of Psychology says  that such measures can in turn lead to surge in mental related illnesses including depression, feelings of confusion, anger and fear, and even substance abuse. It also brings with it a sense of boredom, loneliness, anger, isolation and frustration. In the post-quarantine/isolation period, loss of employment due to the depressed economy and the stigma around the disease are also likely to lead to mental health problems.

The Kenya National Bureau of Statistics (KNBS) states that at least 300,000 Kenyans have lost their jobs due to the Coronavirus pandemic between the period of January and March this year.

KNBC noted that the number of employed Kenyans plunged to 17.8 million as of March from 18.1 million people as compared to last year in December. The Report states that the unemployment rate in Kenya stands at 13.7 per cent as of March this year while it stood 12.4 per cent in December 2019.

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Mama T (not her real name) is among millions of Kenyans who have been affected by containment measures put in place to curb the spread of the virus, either by losing their source of income or having to work under tough guidelines put in place by the MOH.

As young mother and an event organizer, she has found it hard to explain to her children why they cannot go to school or socialize freely with their peers as before.

“Sometimes it gets difficult as they do not understand what is happening due to their age, this at times becomes hard on me as they often think I am punishing them,”

Her contract was put on hold as no event or public gatherings can take place due to the pandemic. This has brought other challenges along with it, as she has to find means of fending for her family expenditures that including rent and food.

“I often wake up in the middle of the night with worries about my next move as the pandemic does not exhibit any signs of easing up,” she says. She adds that she has been forced to sort for manual jobs to keep her family afloat.

Ms. Mary Wahome, a Counseling Psychologist and Programs Director at ‘The Reason to Hope,’ in Karen, Nairobi says that such kind of drastic life changes have an adverse effect on one’s mental status including their family members and if not addressed early can lead to depression among other issues.

“We have had cases of people indulging in substance abuse to deal with the uncertainty and stress brought about by the pandemic, this in turn leads to dependence and also domestic abuse,”

Sam Njoroge , a waiter at a local hotel in Kiambu, has found himself indulging in substance abuse due to challenges he is facing after the hotel he was working in was closed down as it has not yet met the standards required by the MOH to open.

“My day starts at 6am where I go to a local pub, here I can get a drink for as little as Sh30, It makes me suppress the frustration I feel.” he says.

Sam is among the many who have found themselves in the same predicament and resulted to substance abuse finding ways to beat strict measures put in place by the government on the sale of alcohol so as to cope.

Mary says, situations like Sam’s are dangerous and if not addressed early can lead to serious complications, including addiction and dependency, violent behavior and also early death due to health complications.

She has, however, lauded the government for encouraging mental wellness and also launching the Psychological First Aid (PFA) guide in the wake of the virus putting emphasis on the three action principal of look, listen and link. “When we follow this it will be easy to identify an individual in distress and also offer assistance”.

Mary has urged anyone feeling the weight of the virus taking a toll on them not to hesitate but look for someone to talk to.

“You should not only seek help from a specialist but also talk to a friend, let them know what you are undergoing and how you feel, this will help ease their emotional stress and also find ways of dealing with the situation they are facing,” She added

Mary continued to stress on the need to perform frequent body exercises as a form of stress relief, reading and also taking advantage of this unfortunate COVID-19 period to engage in hobbies and talent development.

“Let people take this as an opportunity to kip fit, get in touch with one’s inner self and  also engage in   reading that would  help expand their knowledge.

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