Ruto’s tax policies contradict his climate rhetoric

By Mumbi Mutoko

Recent actions by President William Ruto, known for being vocal on climate change, have earned him criticism for undermining his government’s climate change commitments.

Two recent actions come to mind.

The first is a decision to lift a six-year ban on logging imposed in 2018, informed by shrinking water resources and came amid discussions to save Kenya’s water towers. Environmentalists have argued that lifting this latest ban risks reversing the gains made in recent years to improve Kenya’s tree cover. The country surpassed its 10% minimum tree cover target in June 2022 and plans to raise tree cover to 30% by 2032 by planting 15 billion trees.

Although Environment, Climate Change, and Forestry Cabinet Secretary Soipan Tuya clarified afterwards that the lifting of a logging moratorium only applies to commercial plantations and not indigenous forests as misconstrued by a section of Kenyans, the likelihood, as has been witnessed in the past, opens loopholes for abuse for indigenous and endangered forests, which bodes poorly for the country’s threadbare landscape.

The second is a provision in the Finance Act 2023 that eliminates three taxes on aircraft and parts. Coming at a time when the government has doubled VAT on fuel, a move that directly affects low-income households, as well as increasing taxes on low-to-middle income earners.

The provision exempts importers of aircraft, particularly helicopters, from the 16 percent Value Added Tax (VAT) while simultaneously eliminating the 3.5 percent import declaration fee (IDF) and the two percent Railway Development Levy (RDL).

The proposed tax cuts are expected to significantly boost the aviation industry, which had previously expressed dissatisfaction with the reintroduction of these levies during President Uhuru Kenyatta’s tenure.

Instructively, the aviation sector is one of the biggest sources of greenhouse gas emissions, contributing to the global climate crisis. The World Wildlife Fund highlights the magnitude of this impact, stating that if the aviation sector were treated as a separate nation, it would rank among the top ten carbon-polluting countries worldwide. Furthermore, air travel is the most carbon-intensive activity an individual can partake in.

Exemptions for the wealthy

While seemingly advantageous for the aviation industry, the decision to reduce taxes on aircraft and parts raises concerns about the President’s commitment to combating climate change. Critics argue that these tax cuts could exacerbate the sector’s environmental challenges and undermine efforts to mitigate its harmful effects on the planet.

Helicopter rentals have become popular among wealthy Kenyans, including politicians during election seasons, who are willing to shell out substantial amounts ranging from Sh150,000 to Sh400,000 per hour. These high-end clients are set to benefit significantly from the latest amendments proposed by the National, which aim to exempt importers of helicopters from three levies.

Until July 2021, specific types of helicopters, aeroplanes, aircraft gear, and parts like tires were not subjected to any taxes. This exemption also extended to individuals looking to lease or hire helicopters. However, the Finance Act 2020 introduced changes, requiring individuals renting or purchasing aeroplanes weighing less than or exceeding 2,000 kilograms to pay Value Added Tax (VAT) on their imports. This move aimed to generate an additional Sh38.9 billion from affluent individuals and industries.

The rationale behind these changes is rooted in the government’s pursuit of additional revenue streams from the affluent segment of society. However, critics argue that these exemptions primarily favour the wealthy, particularly during election periods when politicians heavily rely on helicopter services for their campaigns.

The implications of these amendments remain a subject of debate, with some questioning the potential loss of revenue for the government and others expressing concern about the unequal distribution of tax benefits. The outcome of this proposed change will undoubtedly shape the landscape of the aviation industry and shed light on the government’s commitment to promoting fairness and equity in the tax system.

Dumping risk

The unspoken danger of this is the possibility that lowering these taxes could turn Kenya into a dumping site for wealthy nations, leading to detrimental environmental consequences and exacerbating climate change challenges.

Lowering import taxes on helicopters and light aircraft could result in an influx of older, inefficient, and environmentally harmful aircraft from wealthier countries. These aircraft, no longer meeting the stringent environmental standards of developed nations, would find their way to Kenya due to reduced costs. Disposing of such aircraft would pose a grave threat to Kenya’s environment, air quality, and public health.

Older aircraft tend to have higher emissions, contributing to air pollution and greenhouse gas emissions. Increased air traffic from imported helicopters and light aircraft would amplify carbon dioxide (CO2) emissions and other harmful pollutants. This surge in emissions would significantly impact Kenya’s climate change mitigation efforts, undermining the progress made in reducing greenhouse gas emissions and promoting sustainable development.

Political rhetoric and expediency

President Ruto has consistently projected a strong stance on climate change, urging global leaders to take tangible action. In an unexpected move, he even proposed that the upcoming COP28 could be the final meeting of its kind, highlighting concerns about the environmental impact caused by the pollution resulting from delegate transportation to Dubai in November 2023.

The President emphasised the need for discussions to address the unjust nature of the international financial system and discriminatory practices in development financing. According to him, these factors exacerbate the vulnerability of most of the global population. His statements aimed to draw attention to the inequitable aspects of the current worldwide framework and the urgent need for change.

However, President Ruto’s firm rhetoric on climate change raises questions about the effectiveness of his proposed solutions. Climate change researchers and activists swiftly criticised the President for failing to implement stricter taxation measures on the aviation industry. They argue that the aviation sector, a significant contributor to global pollution, should bear a greater responsibility for its environmental impact. Implementing higher taxes on the industry is seen as a crucial step toward combating climate change.

President Ruto’s commitment to combating climate change will be closely scrutinised in light of these concerns. The question remains whether his proposed solutions will be comprehensive enough to tackle the environmental challenges the aviation sector poses and contribute significantly to the global efforts to address the climate crisis.

Incentivise emissions control

“Imposing higher taxes on aviation would be a good start to this climate conversation. It would create a more equitable system by holding the industry accountable for its environmental impact. As other sectors face increasingly stringent emissions regulations, aviation should not be exempt from contributing its fair share. The revenue generated from these taxes could then be allocated to fund research and development of sustainable aviation technologies and infrastructure,” climate change activist Kimani Wand told Nairobi Law Monthly.

‘’These higher taxes could incentivise airlines to adopt cleaner and more fuel-efficient practices. Sometimes imposing financial penalties on carbon-intensive operations could be the only way the industry would be encouraged to invest in alternative fuels, such as electric aircraft, and innovative technologies that reduce emissions. This would drive the development of greener aviation solutions, ultimately benefiting both the environment and public health.’’

Furthermore, increased taxes could help offset the costs of environmental mitigation and adaptation measures. As the world grapples with the consequences of climate change, communities and ecosystems need substantial investment to build resilience against rising sea levels, extreme weather events, and other climate-related risks. Higher aviation taxes would provide a dedicated revenue stream to support these efforts.

But, critics argue that such taxes may burden consumers with increased travel costs. To mitigate this concern, lawmakers should consider designing tax structures prioritising emissions reductions while offering support mechanisms for low-income travellers.