Treasury secretary Henry Rotich. FILE PHOTO | NMG
Summary
- Corporation tax revenue is also expected to increase by Sh59.5 billion to Sh389.2 billion.
- Ordinary revenue is expected to grow by Sh254 billion to Sh1.74 trillion in the coming fiscal year.
- The list of measures to improve income tax collection includes widening the tax base and strengthening tax administration, the document states.
The Treasury has said it expects Pay-as-you-Earn (PAYE) taxes to
grow by Sh68 billion to Sh447.6 billion in the coming fiscal year,
signalling its determination to push through the long promised review of
the income tax law.
Estimates of revenue, grants and
loans for the 2018/19 fiscal year submitted to Parliament show that
corporation tax revenue is also expected to increase by Sh59.5 billion
to Sh389.2 billion.
The documents, submitted to
Parliament on Thursday, also show ordinary revenue is expected to grow
by Sh254 billion to Sh1.74 trillion in the coming fiscal year, on
account of higher collections from income, VAT and excise taxes.
The
money will go towards financing Treasury secretary Henry Rotich’s
Sh2.53 trillion budget and the deficit will be covered by local and
external borrowing.
Boost revenue
Mr Rotich said
in the budget expenditure documents submitted to Parliament last week,
that a "complete overhaul of the current Income Tax Act” is one of the
measures set to be implemented to boost revenue, which has fallen below
target recently.
The list of measures to improve income
tax collection includes widening the tax base and strengthening tax
administration, the document states.
In the budget
policy statement (BPS) released in February, the Treasury said that the
review of the Act would be completed before June 2018.
Excise
taxes, which have mainly targeted alcohol and cigarette consumers, are
expected to contribute Sh39.6 billion more for a total Sh221.5 billion.
Excise
is now subject to a biennial inflation-based increase, computed based
on the average inflation rate in the 12 months preceding the review.
Beverage tax
A High Court ruling in March, however, hit the efforts to levy excise duty on bottled water, juices, soda, other non-alcoholic beverages and cosmetics.
The
court ruled that Kenya Revenue Authority (KRA) and the Treasury had not
complied with the requirement of public participation and did not
involve stakeholders before rolling out the tax, which was expected to
net in nearly Sh4 billion in additional revenue for the government.
Value
Added Tax (VAT) receipts are expected to go up by Sh86.2 billion in the
next fiscal year to Sh464.2 billion, largely due to the addition of
petroleum products in the list of products on which the tax applies
starting in September of this year.
The new VAT on
petroleum products is as a result of a deal Kenya made with the
International Monetary Fund (IMF) in 2015 meant to reduce the country’s
large budget deficit and debt by raising more revenue.
Record high
Based
on the prevailing price of Sh106.83 for a litre of petrol, the 16 per
cent tax would raise the cost of the commodity to a record high of Sh124
per litre, while the price of diesel would go up to Sh113.50 from
Sh97.86 a litre.
Kenya
has, however, resisted calls to raise the rate of VAT from 16 per cent
to 18 per cent to match the rates levied by other East Africa Community
States, sparing consumers an even bigger hit on their pockets.
In
addition to tax revenue, the government has also budgeted for grants
totalling Sh40.3 billion, coming from foreign governments (Sh5.2
billion), international organisations (Sh21.8 billion) and other general
government units (Sh13.3 billion).
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