The Budget Read.

Anxiety, uncertainty and expectation was the mood around the country as citizens awaited the reading of this year’s budget. For some, it is about cutting back on the prices of essentials while others are optimistic that the budgetary projections will address the welfare of the common man. Expectations are high that taxations on items like cooking oil and wheat flour should be reduced while rising the tax on non-essential items such as cigarettes and alcohol. There are also expectations that the budget will have funds set aside for youth empowerment to promote job creation initiative many hoping the budget will address the health sector and most especially the cost of treating Covid- 19. As the cabinet secretary read through the budget, some were disappointed, others not while a percentage of the population was unsure.

Some of the changes include;

  1. Imports of vegetable products to attract 30%  duty rate for the next one year
  2. Excise duty on nicotine products at Ksh5 per gram
  3. Digital Service Tax: Income tax expanded to include internet and electronic products.
  4. Amendments of custom duty to raise Ksh8.7 billion to the exchequer.
  5. Reintroduction of excise duty on betting at the rate of 20% of the amount wagered
  6. Solar power generation equipment exempted from VAT
  7. VAT exemption for laboratory reagents and lab equipment
  8. Sanitisers, ventilators, masks duty free for the next one year
  9. Imports used in manufacture of ventilators VAT exempted
  10. Removal of excise duty on locally assembled motor vehicles, duty-free importation of Completely Knocked Down kits and reduced
  11. corporate tax from 30 to 15% for the first five years of operation.

Kenyans will also benefit from better healthcare and disease prevention, especially for the poorest and most vulnerable households, through National Hospital Insurance Fund (NHIF) governance reforms and the establishment of the Kenya Centre for Disease Control (KCDC) to strengthen disease prevention, detection, and response. University students should however brace themselves for higher fees following an announcement by Treasury Cabinet Secretary Ukur Yatani that the current funding model is not sustainable.

Ksh3.66 trillion budget, the highest recorded in history with a 9% increase from last year’s Ksh3.36 trillion. However, with total government spending exceeding total revenue collection, there exists a Ksh1.6 billion budget hole that has to be filled through, among others, borrowing even as the national debt inches closer to the ceiling set by Parliament. To fund this budget, the Treasury has proposed a mix of debt, taxes and Appropriations in Aids (AiA), revenues collected directly by government agencies as well as donor grand and loans.

This comes at a time when the International Monetary Fund in April approved a $2.4 billion (Sh256.3 billion) loan to Kenya in a three-year financing arrangement. The World Bank has given Kenya another Sh80.2 billion to boost the fight against Covid-19 and jumpstart Kenya’s parastatal reforms, starting with cash-strapped electricity distributor Kenya Power. The loan coming just a day after the Treasury unveiled its budget, would help to reinforce Kenya’s resilient, inclusive and green economic recovery from the Covid -19 crisis, support policy reforms that will strengthen transparency and accountability in public procurement, promote efficient public investment spending in Kenya. It is going to help improve debt sustainability through greater transparency and efficiency in government spending, building on ongoing World Bank support to enhance public finance management systems Reforms will further seek to provide Kenyans with more equitable access to higher education, through a performance-based funding method to reduce the imbalances and inefficiencies created by the existing funding model for universities.

President Uhuru Kenyatta with World Bank Country Director for Kenya Keith Hansen
President Uhuru Kenyatta with World Bank Country Director for Kenya Keith Hansen.  Photo credit: File | PSCU

The Cabinet Secretary has urged Kenyans to pay their taxes freely noting that through the KRA iTax system they have identified, among others – perennial non-compliant taxpayers; defaulters; payment returns without payment; nonfilers; nil filers; credit filers; stop filers and decliners – as some of the ways Kenyans are using to evade the payment of their tax liabilities. 

CS Yatani did not hesitate to issue a directive to all government ministries, departments and agencies and county governments to clear all pending bills by June 30. What is appears as a directive could be a promise to businesses industries and companies owed by the Government. As with every promise, there is always a challenge while his directive and promise to settle pending bills by the end of the month is welcomed. The question is are there enough funds to settle these bills? One thing we do know is that this is not the first time the issue of pending bills is being raised on June 1st 2019, during his speech Madaraka day speech at Narok stadium, President Uhuru Kenyatta said issued an ultimatum stating that pending bills should be paid by the end of the financial year that was June 30th 2020. However, what is certain is that pending bills are costing suppliers and manufacturers a lot. The question remains what means will the Cabinet Secretary employ to ensure compliance by the Government?

Two rights activists have moved to court seeking to have the recently announced budget declared unconstitutional. Okiya Omtatah and Wanjeri Nderi want the court to enact the petition as important and issue a temporary injunction prohibiting the National Treasury, Attorney-General and Parliament from considering, implementing or giving effect in any way to the National Budget that was read on Thursday by Cabinet Secretary Ukur Yatani. In their arguments the Treasury, according to their view has pushed aside parliament and the public from the budget-making process. Emphasising that there should have been openness and accountability, including public participation in financial matters, the activists believe that by exceeding the ceiling that had been set by Parliament, the National Treasury acted beyond its powers.

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