After the reading of the budget by the finance minister,
it’s now time to look at the figures and see whether they make sense or they
were just but another budgetary pronouncement out of protocol.
The Minister and his ministry this time round worked so hard
and came up with a 1.45 trillion worth of budget. That by itself was very good
of them since it’s a sign of growth in our economy, hence the need for more
resources. The problem comes when allocations are miscalculated, and sources of
funds not well thought of.
Taking for example the newly introduced tax on rent income
for landlords, one is left wondering just what kind of policy makers we`ve got
in this country. First I would like to put it clear that this move is a very
good one; but it`s untimely; and that makes it bad!
Once the new tax is enforced, the landlords will
automatically transfer it to their tenants since they are out to make profits.
Anything that comes between them and their profits must therefore be eliminated
by any means even if it means “penalizing” their own clients for it.
That is the case that will eventually happen here in Kenya. The
poor people who cannot afford to own a home and rely on rented houses will have
to bear the tax burden for their landlords. Their disposable income will then
be reduced and consumption fall. With the fall in consumption, investments will
eventually have to slow down since more production will be a waste of resources
for the investors. The revenue that the government wanted to raise through the
tax will then be erased by the reduction in revenue due to reduced consumption.
All said and done, the proposal was not as bad as such. However,
this can only work out in a country where there is sufficient housing supply,
such that; if one landlord raises their rent, the tenant has an option of
moving to another cheaper house. In our case, we actually have a housing
deficit of about 150, 000 units per year. The rents are also very high even
before the introduction of the tax. Now then tell me, what will happen when the
tax proposal is implemented?
This issue of the tax on the rental income is a critical one
that our policy makers should not overlook if they have the Kenyan citizens` best
interests at heart.
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