Think tank asks Treasury to trim Budget as KRA misses tax targets

 

Kwame Owino, who heads the Institute of Economic Affairs. PHOTO | EVANS HABIL 

By KIARIE NJOROGE

A policy think tank has asked the Treasury to consider trimming the next national budget and cut funds wastage in public offices as the Kenya Revenue Authority consistently misses its annual collection targets.

Kwame Owino, who heads the Institute of Economic Affairs (IEA) Wednesday said the Treasury needs to take immediate caution to tame its appetite for expensive loans from both the local and external markets.

The 2016 Budget Policy Statement shows that the development budget for the fiscal year beginning July of Sh683 billion will be lower than that of the current year which was set at Sh711 billion.

“At one point or the other, with too much taxation we’ll run out of sources of funds which is going to force us to discipline our spending,” Mr Owino said.

“We can’t have a budget that’s growing by Sh300 billion every year- not forever.” He added that the option left to the Treasury was to cut on wastage and suspend projects that have no economic growth value.

The interest rate on the 10-year bond issued last month hit 16.1 per cent signalling more expensive credit for the government. The 182-day and 364-day Treasury bill issues also saw yields climb to 14.1 and 14.9 per cent respectively.

Kenya has indicated plans to borrow more outside the country but the strengthening US dollar coupled with unfavourable fundamentals are likely to see international investors demand more to lend to the country.

Mr Owino added that borrowing externally also comes with currency exchange risks.

The Kenya Revenue Authority (KRA) missed its half -year tax collection targets by Sh47.6 billion with major underperformance reported in the key streams of income and value added tax.