National Treasury Cabinet Secretary Henry Rotich on his way to
Parliament to present the 2018/2019 budget statement. Kenyans are
bracing for harder economic times after the government raided their
pockets to fund its Sh3 trillion spending plan for the next 12 months.
PHOTO | SALATON NJAU | NATION MEDIA GROUP
Kenyans were Thursday evening bracing for harder economic times
ahead after the government raided their pockets to fund its Sh3 trillion
spending plan for the next 12 months, read out in Parliament by
Treasury Cabinet Secretary Henry Rotich.
The speech,
which largely avoided delving into the pain points of the proposed
revenue enhancements to meet the huge expenditure proposals, only gave a
few hints that will soon be laid bare in the Finance Bill.
In
a sharp contrast to last year’s pre-election Budget that was laced with
goodies targeting the common man – including cheaper maize flour and
bread – this year’s offer is all about levies, taxes and more taxes,
fixing 'Wanjiku’ in a tight financial corner.
From
proposed tolling of various roads and raising of kerosene prices to
increased license fees for small businesses, the Budget speech showed
the government planned to squeeze more shillings out of the pockets of
the common man.
TOLL STATIONS
It will cost more to send money via mobile phone, eat ugali
and bread, and drive as fuel costs are set to rise and toll stations
take even more from motorists as the government collects revenue to fuel
its ambitious spending plan.
Banks will also have the leeway to tie heavy interest on loans under the proposed removal of the interest rates capping.
Mr
Rotich’s goodies this time were focused at the macro levels of the
economy, including improving local manufacturing through cheaper power
and protection from cheap imports.
The trickle-down
benefit of this plan will, however, depend on whether the manufacturers
will be willing to pass down the lower costs of production to mwananchi.
REVENUE
“With
revenue enhancement measures, we project revenues to rise by 17.5 per
cent to Sh1.92 trillion, equivalent to 20 per cent of GDP, in 2018/19
from the estimated Sh1.66 trillion collected in 2017/18,” Mr Rotich said
in his Budget speech.
The Kenya Revenue Authority, notably, had not hit half of its revenue targets as at April 2018.
Themed
'Creating Jobs, Transforming Lives and Sharing Prosperity', the
expenditure plan, which is Sh400 billion more than last year’s Sh2.62
trillion, will be funded by debt to fill a 5.7 per cent deficit. Those
opposed to Kenya's ballooning debt burden opined that this is financial
suicide as the country can barely repay its existing loans.
Mr
Rotich dropped his earlier proposal to increase income taxes to 35 per
cent for Kenyans earning Sh750,000 and above per month, as well as his
plans to increase taxation on gains made from sale of property.
Critics
argue that Mr Rotich’s spending plan may have several riddles that will
only be unravelled once the final tax approaches are laid bare in the
Finance Bill.
TAX HIGH EARNERS
Audit
and tax advisory services firm Grant Thorton Kenya director, Mr Samuel
Mwaura, said Mr Rotich should have taxed high earners more and allowed
the common man to benefit from some of the proposals he made last year,
many of which are yet to start trickling down.
“High
net worth individuals got away with it this time, but in my opinion,
they should have been made to pay more,” said Mr Mwaura.
Individuals
with income stashed overseas got another year of extension to return
the money into the country, with Mr Rotich proposing to exempt them from
scrutiny on the sources of their wealth as provided for in the Proceeds
of Crime and Anti-Money Laundering Act, or any other Act relating to
reporting and investigation of financial transactions.
He,
however, said those with proceeds from terrorism, poaching and drug
trafficking will not be exempted from this scrutiny. The window for
surrender of the assets, extended to June this year, will now stay open
until June next year.
JUBILEE AGENDA
The
Budget, which was centred on Jubilee’s four flagship agendas for the
second term, saw Mr Rotich allocate some Sh460 billion to the key
drivers of manufacturing, food and nutrition, universal health coverage,
and affordable housing.
An ambitious Rotich told
Parliament that if the Big Four agenda are implemented the economy will
grow by at least seven per cent per year, resulting in more jobs and
reduced poverty.
The affordable housing plan, which
will see the government venture into building 500,000 affordable houses
by 2022, will run on several incentives aimed at attracting investors
for low-cost housing, including the servicing of land in major towns to
prepare them for such initiatives.
Low-cost housing investors will also get their corporate taxes halved to 15 per cent if they put up least 100 units per year.
Consumer Federation of Kenya secretary-general Stephen Mutoro said Mr Rotich had leaned heavily low income earners.
“By raising the cost of food, there is no reason for consumers to welcome the Budget," said Mr Mutoro.
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