Why tax the tools of knowledge?
If you want to develop a nation, what do you do?
Several essentials must be in place. You need your people to be free from hunger and have access to primary health facilities, so that they can do the work they need to, in good health. You need to have the rule of law, so that both private and public property is protected. You need to have the infrastructure that allows your people to connect and trade and exchange.
But all of the above are as nothing if you don’t have another long-term prerequisite: education. If there’s one thing we’ve learned in economic development, it is that education is the key ingredient in the long game.
Education – good education, available to all – is vital because it is only with education that people leave superstition and backward practice behind; it is only with education that people develop the crafts and skills and knowledge that power a modern economy; it is only with education that women enter the workforce and bring crippling birth rates down; and it is only with education that voters can have the discernment to make wise choices at the polling booth.
That is why a serious nation protects education at all costs: it ring-fences its budgets; it invests in teachers; it creates facilities for all; and it keeps pace with technology that allows for cheaper, more effective knowledge transfer.
With that background in mind, I have to ask this Sunday: why has Kenya suddenly thought it a good idea to tax the instruments of knowledge? The controversial VAT Act of 2013 has brought several previously untaxed items into the tax net. Today, I wish to focus just on these: books; computer hardware and software; and mobile handsets.
How can this possibly be a wise thing to do? It may be expedient, but wisdom is another thing altogether. As pundits have been warning since last year, Kenya’s government is in a financial quandary. It is living well beyond its means, and is unable to restrain recurrent expenditure. Simultaneously, it is in the middle of an unprecedented investment spree focusing on key infrastructure, funded mostly by borrowing.
Something was bound to give, and it did. As I have written on this page before, who pays for anything that government does? The answer is simple: taxpayers. Current ones or future ones; local ones or foreign ones. And so here we are.
But books, people? Why would an emerging nation tax books? Books, both printed and electronic, are the repositories of knowledge, the primary tool of knowledge transfer. Why on earth would we tax them? Why would we want to undo the effects of Free Primary Education (such as it is) with such a cavalier move?
As it is, Kenya lacks a reading culture. By making books more expensive, we will block even more parents and children from the book-buying and book-reading club. Diehard readers may not change much, agreed; but the people on the fringes of book-reading, and those who need to be enrolled? Many will be knocked out altogether.
And what of computers, tablets, e-readers, smartphones? In our wisdom, we have not been taxing those items. Suddenly, we are. Those are not consumption items; they are essential tools in a modern nation. Why dampen their usage?
We are plugging a financial hole today by creating a knowledge hole tomorrow. The repercussions of this policy will be felt for generations to come. And as Kenyans are forced to dig deep to finance the profligacy of their government, they are rocked by the Auditor General’s revelations that as much as a third of spending is not properly accounted for.
Wisdom must prevail. There are better, less destructive ways to do this. We can’t fund today by damaging tomorrow.