Connect with us

Business

Kenya to cut budget to $29 billion

Published

on

Loading...
The Kenyan government has proposed to slash its Ksh3.026 trillion ($30 billion) budget for the current financial year by Ksh55 billion ($55 million), a move that will affect key sectors of the economy.

The reduction is contained in the supplementary budget estimates prepared by National Treasury Cabinet Secretary Henry Rotich and tabled during a special sitting of the National Assembly on Tuesday.

If adopted by the MPs on Thursday – during a second special sitting, the budget will reduce to Ksh2.971 trillion ($29.7 billion) as the government fights to bridge a huge deficit because it is only able to raise about Ksh1.6 trillion ($16 billion).

The proposed cuts will be considered on Wednesday by the Budget and Appropriations Committee, before the report is tabled in the House on Thursday.

Some of the biggest losers are the Devolution ministry (Ksh6 billion; $60m), National Treasury (Ksh6 billion; $60m), the Information and Communication Technology ministry (Ksh5.9 billion; $59m) and the Energy docket (Ksh2.6 billion; $26m).

The Infrastructure ministry is set to lose Ksh8.7 billion ($87m) while the Foreign Affairs ministry will lose Ksh179.5 million ($1.8m).

The Ksh36 billion ($360 million) allocated to Parliament will also reduce by Ksh5 billion ($50 million) while the National Lands Commission (NLC) will lose Ksh50.4 million ($0.5m).

The education sector was not left behind. The Vocational and Technical Training has had its budget slashed by Ksh1.3 billion ($13m), University Education and Research by Ksh1.07 billion ($10.7m), Early Learning and Basic Education by Ksh487.3 million ($4.8m) and the Teachers Service Commission (TSC) by Ksh67.7 million ($0.67m).

Mr Rotich said in his statement to the MPs that the government has to make prudent policy decisions so that unwarranted debt burden is not imposed on future generations.

“Over the medium term, the national government’s borrowing shall be used only for the purposes of financing development expenditure and not for recurrent expenditure,” he said, despite accusations by critics over the spiralling corruption in the public institutions.

Loading...

As the other sectors suffered cuts, the Ksh32 billion ($320m) allocated to the National Intelligence Service (NIS) remained intact and so was the case with Ksh2.9 billion ($29m) for the Ethics and Anti-Corruption Commission( EACC).

The Auditor General’s office lost Ksh110 million ($1.1m) and the Controller of Budget Ksh15 million ($150,000).

($51b) mark as at June 30, 2017.

In a bid to cure the growing debt, the International Monetary Fund (IMF) has proposed a slowdown on the borrowing appetite and a funding of the budget from within, a move that brought on the 16 per cent Value Added Tax (VAT) on fuel products.

President Uhuru Kenyatta want the tax rate halved.

Though the IMF move has been opposed by Kenyans and political leaders, President Kenyatta recently said there are no option so Kenyans must persevere to gain in future.

A section of MPs are, however, apprehensive that the gains may never be realised with increased looting of public resources.

Interestingly, the Housing docket lost Ksh80 million ($0.8m) despite being part of the president’s Big Four Agenda for affordable housing for Kenyans as he leaves office in 2022.

Mr Rotich has promised to ensure that up to 30 per cent of the national budget is allocated to development.

He said that all internal and external borrowing will be restricted to the funding of development projects.

Compensation of employees – benefits and allowances – will now be restricted to 35 per cent of the national budget.

“We have made adjustments to the programmes and votes as a result of amendments to the Finance Bill, 2018. Some of the adjustments exceed 10 per cent. We are, in this regard, requesting special approval of the expenditure adjustments,” he said.

According to the CS, going forward, the government will come up with measures to realise the 35 per cent threshold provided for in Section 26 (1) (a) of the Public Finance Management Regulations, 2015.

Loading...
Continue Reading

Business

Lights, camera, action! Artistes brighten economy

Published

on

Loading...

Covid-19 had negatively impacted entertainment revenues.

Loading...
Continue Reading

Business

KRA must ease tax filing to boost revenues

Published

on

Loading...

Nikhil Hira Independent tax consultant and Director Bowmans Coulson Harney (law firm). [Courtesy]

Anyone who has been following Kenya’s budgets over the last few years will recall headlines each year saying that the country has set its largest-ever budget. 

The upcoming 2021/22 fiscal year is no exception, with Treasury Cabinet Secretary Ukur Yatani announcing a budget of Sh3.6 trillion – yes, the biggest ever! A little over Sh2 trillion will come from government revenues, with approximately Sh1.8 trillion of this from tax revenues. 

The balance will be borrowed – another common feature of the last few years. 

This year’s budget comes amidst an economic crisis brought on by the Covid-19 pandemic, with the inherent assumption that the pandemic will come to an end before the start of the next financial year. 

Given surges in infections that are being seen globally, and indeed in Kenya, this assumption may well be the deal-breaker. 

The Ministry of Health has already said that Kenya may see another wave of infections in July, fuelled by the Indian variant. This could result in more lockdowns with the associated impact on the economy and indeed revenue collections. The lack of vaccines is an issue that the government must address as a matter of great urgency if the country is to get through the pandemic without further economic woes. 

While deficits in government budgets are not uncommon, Kenya seems to be annually widening the gap between expenditure and revenues. 

If one applies this model to their household budget, the upshot will almost certainly be bankruptcy. 

Take a quick survey and help us improve our website!

Take a survey

What is actually required is curtailing recurring government expenditures, which is something that the government has acknowledged in the past with proposed austerity measures. 

The reality is that Kenya has not succeeded in doing this, and the pressure on revenue collection is exacerbated. 

Loading...

When you add to the high level of wastage and corruption we are witnessing, the deficit will almost certainly continue to widen. 

The responsibility for tax collection and enforcement lies with the Kenya Revenue Authority better (KRA). 

There is no doubt that the authority has improved significantly in this task since it was set up in 1995. 

The taxman estimates that 4.4 million tax returns were filed by June 30 last year, up from 3.6 million in the previous year.  While this is a significant improvement, when compared to the country’s population, this number of returns seems unusually low. 

The increase in the number of tax returns, is to a large extent, due to the online reporting system, iTax, and a major push by KRA through taxpayer education.

There is no doubt that the online system has made filing tax returns significantly easier and gone are the large queues of people witnessed at Times Tower on deadline day. 

That said, there is still much to be done to make filing returns a seamless and painless exercise. 

System downtime during filing periods is something that all of us will have experienced, although, in typical Kenyan fashion, we inevitably wait until the last day to file our returns as we do with most things! 

The spreadsheet that one uses to file a return is by no means the simplest to use.  One key issue seems to be that taxpayers are not alerted to changes in the model until they try to upload a return. 

The spreadsheet does not allow one to make it more relevant to their sources of income – in essence, it is too rigid and inflexible. KRA should be able to rectify this without too much effort.

Last year was unusual in that different rates of tax were applicable in the first quarter as compared to the rest of the year.  This followed the Covid-19 relief measures that were introduced in April 2020. 

There was much debate about whether the changes were meant to apply for the whole year or whether some form of apportionment was needed. 

In the end, the decision was made for apportionment. One can argue about what the correct treatment should be, but the issue was how long it took for the decision to be made and, indeed, to amend the iTax system. 

The age-old notion has always been that the more complex and difficult it is to file a tax return, the more likely it will be that taxpayers simply won’t file their returns. While the issue with the system has been resolved, there is an inherent administrative issue here that must be addressed. 

KRA has to be significantly more proactive in dealing with changes in rates and law to ensure the least inconvenience to taxpayers. 

The writer, Nikhil Hira, is the Director of Bowmans Kenya.

The views expressed in this article are the author’s and not necessarily those of Bowmans Kenya  

Loading...
Continue Reading

Business

The age of gentrification is truly upon our country

Published

on

Loading...

Never mind the businessmen outside Nairobi could be richer. Rural folks aspire to one day moved to a new county (city).

Loading...
Continue Reading
Advertisement
Loading...
Advertisement
Loading...

Trending