Kenyans were Tuesday left bracing for hard times ahead after it emerged that President Uhuru Kenyatta’s memorandum to Parliament rejecting MPs’ position on petroleum tax came with new and higher levies on a wider array of goods and services.
The revelation came even as the National Assembly agreed to the proposals, including a doubling of excise tax on money transfer charges in exchange for a halving to eight per cent of the proposed valued added tax (VAT) on petroleum products.
If Parliament passes Mr Kenyatta’s proposals, mobile money transfer charges will now attract excise tax at the rate of 20 per cent from the current 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.
At the heart of the President’s quest to introduce new taxes and increase old ones are the huge financing obligations in this year’s budget, including the Sh870 billion that must be spent on debt servicing to avoid default.
Mr Kenyatta also introduced a special “anti-adulteration” tax, to be charged at the rate of Sh18 per litre of kerosene, in a move that will push the commodity’s retail price much closer to diesel.
Both the ruling Jubilee Party and opposition MPs yesterday pledged support for the new tax measures, meaning they are likely to get parliamentary approval and define Kenya’s economy in the short term.
Mr Kenyatta said the measures are required to help mitigate a funding shortfall of Sh48.6 billion once the VAT on fuel is halved to eight per cent.
“The proposed amendments in the Finance Bill under Clause 18, which seeks to amend Section B of Part 1 of the First Schedule to the Value Added Tax Act, 2013, effectively extending the exemption for a further two years shall, together with the additional expenditures in the Appropriation Act, 2018 result in a major financing gap of the budget,” Mr Kenyatta wrote in a memorandum to the National Assembly.
“The amendments that I have proposed reduce the financing gap but do not eliminate the gap. To this end, the National Assembly needs to effect a reduction in the expenditure as contained in the Appropriation Act, 2018 by at least Sh55 billion.”
The controversial tax, which has significantly increased transport costs and is expected to cause a general rise in inflation, was expected to generate an extra Sh35 billion in the fiscal year ending June 2019.
Budget revised (Expenditure) Sh bn
Expenditure has been revised downwards by 2.9 per cent.
The levy, whose collection started this month, is now expected to rake in half the amount once the rate is reduced to eight per cent from 16 per cent. Besides the new tax measures, Mr Kenyatta has proposed bold moves aimed at reducing government expenditure, with the twin actions having the net effect of cutting the total budget by Sh55 billion.
From the initial Sh3.02 trillion, total spending is now projected to stand at Sh2.97 trillion after the cuts whose biggest victims are the national government’s development expenditure as well as disbursements to county governments. For consumers, the changes represent additional pain after the President declined to make even deeper budget cuts to ease the burden on ordinary folk as proposed by a section of parliamentarians.
Low-income households will be particularly hard hit by the introduction of the special levy on kerosene, a move Mr Kenyatta said is meant to curb fuel adulteration.
The tax will lift kerosene price above the Sh100 per litre mark for the first time and have it retail close to diesel and petrol, which are currently retailing at Sh115.4 and Sh125.5 per litre respectively in Nairobi. Rampant adulteration of diesel and petrol has been blamed on the significant gap between the price of kerosene and petrol and diesel. The higher tax on cash transfer charges ropes in all personal and business transactions conducted through the formal financial systems including bank and mobile money platforms.
Mobile telephone firms and banks, among other affected institutions, are expected to raise their charges in the wake of the sharp jump in taxation – in a move that once again hits the poorest segments of the population hardest.
The long-term drop in calling rates and data prices is expected to be halted by the move to hike excise taxes on the services to 15 per cent from the current 10 per cent.
In his memo, Mr Kenyatta laid an emphasis on generating more revenues from consumption taxes, adding that the measures are a continuation of the tax reforms that the country has been undertaking in recent years.
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.