Kenya Crashes on the Laffer Curve

January 23, 2024 by Dan Mitchell @ International Liberty

The Laffer Curve is the common-sense notion that there is not a simplistic mechanical relationship between tax rates and tax revenue.

You also have to consider potential changes to what’s being taxed.

I’ve cited interesting case studies from Canada, Denmark, Hungary, Ireland, Italy, Portugal, Russia, France, and the United Kingdom.

Today we’re going to add Kenya to our list.

But before looking at Kenyan tax policy, let’s first look at some IMF data on the rapidly growing burden of government spending in that East African nation.

That’s a very depressing chart, showing about 10 times as much spending today compared to 20 years ago. But keep in mind that there’s been inflation.

If you look instead at spending as a share of economic output, the government budget is now consuming about 22.5 percent of GDP compared to 15.5 percent of GDP two decades ago.

A very troubling development, though not as bad as implied by the chart.

As is usually the case, bad spending policy has led to bad tax policy. Kenyan politicians have been trying to squeeze more money out of the private sector.

However, as reported by Victor Amadala for the Star, higher taxes are backfiring.

 

Kenyans…talked to the Star on measures they take to survive in a tough economic environment characterized by the high cost of goods and services due to high taxes… Last year, the government introduced several tax measures in the Finance Act, 2023 that added pressure on taxpayers, pushing up the cost of living. It, for instance, doubled Value Added Tax to 16 percent on fuel… Others are the introduction of a housing levy and raised deductions on national health coverage and social protection. …An analysis of official data by both the Kenya National Bureau of Statistics and the Energy and Petroleum Regulatory Authority (EPRA) shows kerosene consumption dropped by almost half, three months after VAT on fuel doubled in July last year. Only 15.3 million litres of kerosene were sold in the review period compared to 28.8 million litres same period in 2022, the lowest in past five years. …The state is on the receiving end as consumers become creative to escape high taxes. The latest report by the Parliamentary Budget Office (BPO) shows Kenya Revenue Authority (KRA) missed the tax revenue collection target for quarter one of the current financial year by Sh72.5 billion. …”You cannot defy the Laffer Curve theory and survive. Tax measures must be of mutual benefit between the public and the state. This is just the tip of the iceberg, winter is coming,” an economist Shem Mutonji opines. …This sentiment is echoed by his colleague, Joe Ngatia who says you cannot overmilk a cow to prosperity for “It will throw a hoaf in desperation.”

Sounds like we need Shem Mutonji and Joe Ngatia working for the U.S. Treasury. Maybe they could convince Joe Biden that overtaxing the American economy is not a good idea.

Eco-extremists attack crucial pesticides, punish the poorest in Kenya

By Dr. Jay Lehr | January 31st, 2020 Environment 43 Comments @ CFACT

One has to wonder why Non-Governmental Organizations (NGOs) that are funded by Left-wing financiers attempt to thwart the poorest in our world from achieving an adequate diet and sufficient income to climb above poverty. Yet, without a convincing positive reason for their actions, they do it around the world. We frequently see villages in Africa, for example, deprived of conventional power from coal and natural gas in favor of expensive and undependable wind and solar power favored by the anti-fossil fuel community.

Now in Kenya a story is shaping up  that takes an even more ugly turn. There some ill-informed and deceitful Green groups are asking the Kenyan government to outlaw the use of important chemical pesticides that protect its crops from the ravages of pest infestations. The numbers are difficult to assimilate.

Two of these NGOs — the Biodiversity and Biosafety Association of Kenya and the Kenya Organic Agriculture Network — tip off their goals in their titles. The third is too vague and obtuse to bother naming. They have collectively asked that 262 useful pesticides be outlawed by the Kenyan Parliament. For the moment the Parliament is not in session, so there may be time to educate them about the lies and innuendos being spread against pesticide use by the environmental extremists.

Many of the targeted pesticides by these activist groups have been tested and approved by foreign governments, and others have not been because they aren’t useful against the native pests in other countries. Of greatest concern to Kenyan agriculture would be the end of the use of effective chemicals that kill the locusts ravaging Kenya on a regular basis.

Every successful killing of a locust swarm, which is how they attack, saves gigantic quantities of food for a nation like Kenya without abundance. At the risk of causing your eyes to glaze over, I will define “gigantic” with the use of some simple arithmetic. Stay with me and you will well understand why I often use the word evil for those who finance such radical environmental fearmongering.

Locusts swarm at densities of 40 to 60 million thick over an acre of crop land. Obviously, it is impossible to spray the entire agricultural acreage of Kenya, but let’s see what we could accomplish if we spray half a square mile of farmland or 320 acres. I will give you the simple cumulative numbers, and if you wish you too can do all the arithmetic to be sure I am not exaggerating.

From birth to full maturity a locus will lay an average of 80 eggs. Each locus eats about 2.5 grams a day for a life span averaging 4 months which is 300 grams per locust. Then their 80 progeny eat about 150 grams while alive during the last two months of the mother’s life, and half of them have laid 60 eggs by the end of that time. Without a calculator you can figure out that every locust will account for 744 kilograms, or about three quarters of a ton, of food per month by a single locust and its offspring over 4 months of its life cycle. In four months the total is 3 tons of food. Now assume an average of 50 million locusts per acre and you will find spraying 320 acres saves, wait for it, 480,000 tons of food! That feeds a lot of folks and earns a lot of money.

The NGOs lobbying the Kenyan government hope to eliminate the opportunities to grow this food by allowing the locusts to run free and unhindered by the pesticides that can eliminate them. They have thrown up a smoke screen of complaints on chemicals not substantiated by research investigations. It is quite easy to scare the public by listing strange sounding chemicals of which the people have no understanding. They do this all over the world, but due to Kenya’s severe problem with locusts the damage that can occur as a result of their despicable actions, this could have a catastrophic impact on that nation’s food supply and economy.

Author

Dr. Jay Lehr, CFACT Senior Science Analyst Jay Lehr has authored more than 1,000 magazine and journal articles and 36 books.

Now Kenya gets to pay the China piper

December 28, 2018 By Monica Showalter

All that good P.R. China got for its "one belt, one road" infrastructure-building in third world countries - so much more constructive than America's military spending, see - is starting to look like something entirely different now that Kenya is about to fall to China and its very humorless bill collectors.  Taiwan News is reporting.

China may be preparing to seize some major assets in the African nation of Kenya, as a result of debt-trap diplomacy.   African media reports that Kenya may soon be forced to relinquish control of its largest and most lucrative port in Mombasa to Chinese control.   Other assets related to the inland shipment of goods from the port, including the Inland Container Depot in Nairobi, and the Standard Gauge Railway (SGR), may also be compromised in the event of a Chinese port takeover.  

Kenya has reportedly taken extremely large loans from the Communist government for the development of some major highways, and especially for the SGR, which forms a crucial transport link to and from Nairobi for the import and export of goods through Mombasa. In November, Moody’s noted that Kenya is at high risk of losing strategic assets because of debts owed to Beijing.  Local media began to express concern that Chinese lenders may be angling to seize assets, since it does not appear the Kenyan government will be capable to repaying the loans.

Beijing, of course, is denying it. But that was a couple days ago. And its only argument begs the question. China insists that the project, out there in deepest Kenya, will indeed make money, effectively suggesting that it won't need to expropriate the port. It doesn't say what will happen if the project doesn't make money, which is what Moody's is focusing on............ To Read More....... 

My Take - Okay, this is a bad thing why?  That's a good thing for the U.S.  It's a terrible thing for the all the poor people in all these countries.  People who just want to live their lives decently.  Neither socialism or tribalism will ever provide that. 

These developing countries are the very crap holes Trump talked about.  They're either being run by tribal buffoon,s who only care about stealing as much money as they can while they can, or psuedo-socialists who only care about stealing as much money as they can while they can.  And all that their citizens are left with is dystopia. But this is going to be the cure. 

They're broke!  China has loaned money it doesn't have to people who don't have the money to pay them back.  If they try to take what little developed value these countries have, they'll be stuck with a pig in a poke, making both the developing countries and China more broke, not to mention the economic international reaction to such an action. 

Economic collapse is going to fix all their little red wagons, and which country will every one of them have to turn to?  Take a guess.  

China is broken, politically, economically, philosophically and demographically, and nothing is going to fix that.  But in the meanwhile, they're going to extend the pain far and wide. 

There was a time when it was considered completely politically correct for a third world country to default on it's loans when the United States or European countries held those debts, and the communists/leftists/socialists of the world applauded them.  It will be interesting to watch when and if these third world nations do that to China.