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Slow job growth denies KRA Sh30bn income tax

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Economy

Slow job growth denies KRA Sh30bn income tax

Ukur Yatani
Acting Treasury CS Ukur Yatani. FILE PHOTO | NMG 

The government’s hopes of raising higher revenues from new jobs and salary increases in the private sector have been dampened after the Kenya Revenue Authority (KRA) recorded a 12 percent shortfall in its targeted tax collection from salaries.

The Treasury had estimated that it could raise Sh110 billion from Pay As You Earn (PAYE) in the first three months of the current financial year, but only managed to raise Sh98.1 billion.

It had also projected to collect Sh100 billion from incomes, but the taxman brought in Sh82 billion, underlying the challenges that the economy is experiencing in creating new jobs and increasing incomes in both the formal and informal sectors.

The Treasury finds itself in a catch-22 as it can ill-afford to miss tax targets given that it has run out of room to borrow to plug the revenue gap. However, it still has a little wiggle room after Parliament last month passed an amendment raising the debt ceiling to Sh9 trillion.

This came in the wake of regulatory filings showing that Kenya spends about Sh60 out of every Sh100 it collects as tax to pay off debt. Shrinking tax collection is set to pile more pressure on the Treasury to meet its obligations.

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“Ordinary revenue collection was Sh384.4 billion against a target of Sh444.5 billion, which was Sh60.2 billion below the target,” acting Treasury Secretary Ukur Yatani said. President Uhuru Kenyatta, who has made job creation a pursuit for his legacy has been hard-pressed to deliver on the governments ability to create a favourable condition for investment.

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In June, Mr Kenyatta touted the revamped Rivatex textile factory, where government had injected Sh5 billion to generate 3,000 jobs. He later launched MasterCard Foundation’s Africa Youth Works, a Sh100 billion initiative to create five million jobs over five years and launched the Kenya National Shipping Line that would create over 50,000 jobs.

However, data does not seem to support the hyped launches, suggesting instead a series of job cuts, freezes on salary increases and financial headwinds for businesses struggling with delayed government payments and a slow down in lending by commercial banks.

The President recently sent his ministers under the National Development Implementation and Communication Cabinet Committee to meet the business lobby group under the umbrella of the Kenya Private Sector Alliance to draw a roadmap for stimulating private sector growth to create jobs and deliver on the Big Four Agenda.

The meeting at the Kenya School of Government will draw a plan that will be presented to Mr Kenyatta in two weeks. Tax targeted on manufactured goods including Value Added Tax on local goods missed the target by Sh6 billion to post Sh59.4 billion in the three months to September while VAT on imported goods fell short by Sh8 billion to Sh46.3 billion.

Excise duty for the first quarter of the fiscal year was Sh49 billion against a target of Sh57 billion while import duty was Sh25 billion against a target of Sh32 billion. The AIA collected was below target by Sh13.7 billion during the quarter under review, which the Treasury blamed on under-reporting in the ministerial expenditure returns for the period under review.

The Railway Development Levy collection amounted to Sh5.5 billion against a target of Sh7 billion. By the end of September 2019, total revenue collected, including AIA, amounted to Sh421.2 billion against a target of Sh495 billion.

Even as the government fell behind tax collection targets, pressure to pay suppliers is turning out to be a huge headache with the national government owing to pending bills running close to Sh100 billion.

The Treasury had issued a Circular No. 7/2019, for pending bills from last year to be treated as a first charge in the new budget. “The total outstanding pending bills including expenditure carry-overs as at the end of FY 2018/19 amounted to Sh94.5 billion. This comprised of Sh92.2 billion and Sh2.3 billion non-AGPO and AGPO pending bills and expenditure carry-overs respectively,” Mr Yatani said in the first quarter economic budget review. The Treasury is also facing a problem of heavy national recurrent budget which overshot limits amounting to Sh381.3 billion (excluding Sh9.9 billion for Parliament and the Judiciary), against a target of Sh374.4 billion, leading to an over-expenditure of Sh7 billion.

The over-expenditure was mainly due to above-target payments of operation and maintenance and domestic interest by Sh8.8 billion and Sh4 billion respectively.

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World Bank pushes G-20 to extend debt relief to 2021

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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.

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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.

ALSO READ:Global Economy Plunges into Worst Recession – World Bank

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Kenya’s Central Bank Drafts New Laws to Regulate Non-Bank Digital Loans

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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.

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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.

SEE ALSO: Central Bank Unveils Measures to Tame Unregulated Digital Lenders

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Scope Markets Kenya customers to have instant access to global financial markets

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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.

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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.

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