President Uhuru Kenyatta is banking on Parliament’s passing of his painful tax proposals to raise the Sh130 billion he needs to keep his spending plans on track while protecting the integrity of the country’s finances.
Treasury secretary Henry Rotich Wednesday told the National Assembly’s Finance and National Planning Committee that he intends to raise Sh17.5 billion from eight per cent VAT on petroleum products, Sh9.8 billion from the “kerosene adulteration” tax while imposition of Sh20 per kilogramme of sugar confectionery, including white chocolate will raise Sh473 million.
The committee further heard that introduction of 1.5 per cent levy for National Housing Development Fund will generate about Sh57 billion a year.
Initial calculations by the Parliamentary Budget Office (PBO), which advises MPs on budget and fiscal matters, shows the application of 1.5 per cent of gross basic salaries of workers will realise a similar amount.
Under the Housing Development Fund plan, an employer and employee are separately required to contribute 1.5 per cent of the monthly basic salary so long as the sum of the employer and the employee contributions does not exceed Sh5,000.
“The wage bill for the government is about Sh650 billion and we will require an annual allocation of about Sh10 billion, being the 1.5 per cent of the employer’s contribution to finance the Housing Fund, Mr Rotich said, adding that the impact on government will be about Sh5 billion depending on the date the regulations are gazetted.
“We will have to cater for the second half of the financial year assuming that the fund comes into effect on January 1, 2019. We will then bring a supplementary budget to factor in this,” he said during the committee session to scrutinise the President’s Memo on Finance Bill, 2018.
Mr Rotich said the proposed 12 per cent excise duty on fees charged for mobile money transfer services, the 15 per cent excise duty on telephone and internet data services and the 20 per cent duty on fees charged for money transfer services by banks, money transfer agencies and other financial service providers will realise Sh20.2 billion.
The minister said the proposed reduction of gaming tax from the current 35 per cent to 15 per cent and introduction of a 20 per cent tax on winnings is expected to raise Sh25 billion up from the current Sh8.7 billion.
He said the reduction of the tax on gaming to 15 per cent and introduction of 20 per cent tax on winnings should expand the tax net to cover taxation on betting, gaming, lotteries and prize competitions thereby enhancing equity and fairness in taxation.
Mr Kenyatta has, in his memorandum to parliament, proposed to halve the controversial 16 per cent VAT on petroleum products that kicked in on September 1 – a proposal that can only be overturned by a vote supported by not less than 233 MPs.
The controversial tax, which has significantly increased transport costs and increase inflation, was initially expected to generate an extra Sh35 billion in the current fiscal year ending June 2019.
“We anticipate a one to two per cent impact on inflation, which in August stood at four per cent,” Mr Rotich said, adding that the real impact will be known when the September figures are released.
Caxton Masudi, the Kenya Revenue Authority (KRA) head of domestic taxes, said the taxman expects positive revenue outcomes with new VAT on petroleum.
“The eight per cent VAT will be charged on importers, marketers and retailers and at any stage it will attract the eight per cent VAT. We have taken care of all costs incurred from importation to sale to consumers,” he said. Kenyans were yesterday still looking up to their MPs to avert the imposition of value added tax (VAT) on petroleum products, and the array of taxes on essential goods and services, but that is unlikely to happen with the closing of ranks among government and opposition benches in support of the measures.
If MPs pass Mr Kenyatta’s proposals, mobile money transfer charges will now attract excise tax at the rate of 12 per cent, while mobile calls and data will be levied at 15 per cent from the current 10 per cent in a move that could reverse the recent decline in mobile call costs.
Mr Kenyatta is seeking to plug a huge financing obligations in this year’s budget, including the Sh870 billion that must be spent on debt servicing to avoid default.
World Bank pushes G-20 to extend debt relief to 2021
World Bank Group President David Malpass has urged the Group of 20 rich countries to extend the time frame of the Debt Service Suspension Initiative(DSSI) through the end of 2021, calling it one of the key factors in strengthening global recovery.
“I urge you to extend the time frame of the DSSI through the end of 2021 and commit to giving the initiative as broad a scope as possible,” said Malpass.
He made these remarks at last week’s virtual G20 Finance Ministers and Central Bank Governors Meeting.
The World Bank Chief said the COVID-19 pandemic has triggered the deepest global recession in decades and what may turn out to be one of the most unequal in terms of impact.
People in developing countries are particularly hard hit by capital outflows, declines in remittances, the collapse of informal labor markets, and social safety nets that are much less robust than in the advanced economies.
For the poorest countries, poverty is rising rapidly, median incomes are falling and growth is deeply negative.
Debt burdens, already unsustainable for many countries, are rising to crisis levels.
“The situation in developing countries is increasingly desperate. Time is short. We need to take action quickly on debt suspension, debt reduction, debt resolution mechanisms and debt transparency,” said Malpass.
Kenya’s Central Bank Drafts New Laws to Regulate Non-Bank Digital Loans
The Central Bank of Kenya (CBK) will regulate interest rates charged on mobile loans by digital lending platforms if amendments on the Central bank of Kenya Act pass to law. The amendments will require digital lenders to seek approval from CBK before launching new products or changing interest rates on loans among other charges, just like commercial banks.
“The principal objective of this bill is to amend the Central bank of Kenya Act to regulate the conduct of providers of digital financial products and services,” reads a notice on the bill. “CBK will have an obligation of ensuring that there is fair and non-discriminatory marketplace access to credit.”
According to Business Daily, the legislation will also enable the Central Bank to monitor non-performing loans, capping the limit at not twice the amount of the defaulted loan while protecting consumers from predatory lending by digital loan platforms.
Tighter Reins on Platforms for Mobile Loans
The legislation will boost efforts to protect customers, building upon a previous gazette notice that blocked lenders from blacklisting non-performing loans below Ksh 1000. The CBK also withdrew submissions of unregulated mobile loan platforms into Credit Reference Bureau. The withdrawal came after complaints of misuse over data in the Credit Information Sharing (CIS) System available for lenders.
Last year, Kenya had over 49 platforms providing mobile loans, taking advantage of regulation gaps to charge obscene rates as high as 150% a year. While most platforms allow borrowers to prepay within a month, creditors still pay the full amount plus interest.
Amendments in the CBK Act will help shield consumers from high-interest rates as well as offer transparency on terms of digital loans.
Scope Markets Kenya customers to have instant access to global financial markets
NAIROBI, Kenya, Jul 20 – Clients trading through the Scope Markets Kenya trading platform will get instant access to global financial markets and wider investment options.
This follows the launch of a new Scope Markets app, available on both the Google PlayStore and IOS Apple Store.
The Scope Markets app offers clients over 500 investment opportunities across global financial markets.
The Scope Markets app has a brand new user interface that is very user friendly, following feedback from customers.
The application offers real-time quotes; newsfeeds; research facilities, and a chat feature which enables a customer to make direct contact with the Customer Service Team during trading days (Monday to Friday).
The platform also offers an enhanced client interface including catering for those who trade at night.
The client will get instant access to several asset classes in the global financial markets including; Single Stocks CFDs (US, UK, EU) such as Facebook, Amazon, Apple, Netflix and Google, BP, Carrefour; Indices (Nasdaq, FTSE UK), Metals (Gold, Silver); Currencies (60+ Pairs), Commodities (Oil, Natural Gas).
The launch is part of Scope Markets Kenya strategy of enriching the customer experience while offering clients access to global trading opportunities.
Scope Markets Kenya CEO, Kevin Ng’ang’a observed, “the Sope Markets app is very easy to use especially when executing trades. Customers are at the heart of everything we do. We designed the Scope Markets app with the customer experience in mind as we seek to respond to feedback from our customers.”
He added that enhancing the client experience builds upon the robust trading platform, Meta Trader 5, unveiled in 2019, enabling Scope Markets Kenya to broaden the asset classes available on the trading platform.