Day: January 26, 2014

BATTLE LINES DRAWN IN KENYAN TAX REVOLT

PAAK
PAAK

Taxation can impoverish as well as replenish, overturn empires or elevate kings. It is getting the balance right that counts.   Last Wednesday 400+ members of Kenya’s running nobility gathered in Eldoret, the center of Kenyan running in the North Rift Valley, to unite in opposition to an imposition, an imposition of a direct tax on their athletic earnings.

In one voice the athletes said, nay! we already pay indirect tax via the local levies on holdings, businesses, and the like.  (Athletes are the Republicans in this scenario, the trickle down, job-creators.)  On the other side sits the Kenyan Revenue Authority (KRA) which says the law is simple, all Kenya citizens must pay (30%) tax on all earnings.

But as always in Kenya, there is the law and then there is the policy.  For years Kenyan athletes have been seen as ambassadors for their country, elevating its world standing by their superb racing exploits. What’s more, their income was considered an engine of commerce as they poured their earnings back into their local economies.   And since those businesses and investments were always subjected to taxation, the athletes say the imposition of a direct tax on earnings would not only stifle future economic development, it would double tax them as their earnings are already taxed in the countries in which they race.

But there’s more to it than that.  Just 50 years free from British colonial rule, Kenya remains a young nation, and the ties that bind a nation together are not as developed as one might assume. What further underlies the athletes’ opposition to the new policy is the duplicity they see as coming from the government.

Kenyan Parliamentarians are among the highest paid in the world in a nation whose citizens earn an average $1800 per year.  Last summer the MPs succumbed to public pressure and agreed to drop their salaries by nearly 40%, but from $120,000 a year to $75,000!  Then they voted themselves exempt from paying any tax!  That’s good work if you can get it.

The argument from the KRA vantage point says that the policy of not directly taxing the athletes’ income was initiated decades ago when there was just a trickle of men running overseas. Today, that trickle has become a torrent, and the time for such a lenient tax policy has long since passed, and the athletes must now be treated like any other citizen.  Thus, what we see is one side looking to overturn tradition, while the other wants to maintain its legacy. (more…)

Advertisements