CS Yatani tables Sh3.2trn budget for Kenya

Summary

• Kenyans will know whether CS Yatani will drop his plans to reintroduce tax measures that will drive up the costs of basic commodities including bread, cooking gas and clean energy stoves.

By PAUL WAFULA

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The budget speech for the 2020/2021 financial year is being delivered by Treasury Cabinet Secretary Ukur Yatani. 

Kenyans will know whether CS Yatani will drop his plans to reintroduce tax measures that will drive up the costs of basic commodities including bread, cooking gas and clean energy stoves.

The Finance Bill has proposed to reintroduce a 14 per cent VAT on liquefied petroleum gas (LPG), inputs or raw materials for electric accumulators, helicopters and tractors, among others.

“The proposed VAT charge on LPG will also increase the price of cooking gas, which contradicts government efforts to shift consumers from the use of wood fuel to LPG to conserve our forests," KPMG says in its analysis of the proposed tax measures.

The alcohol industry is also set to suffer as more excise duty is loaded on spirits. The Bill also creates the National Roads Toll Fund — tolls collected will be remitted to this Fund.

The new taxes are also expected to hit retirees by subjecting income from the National Social Security Fund to tax.

Mr Yatani has further indicated that he will got after digital transactions by through the introduction of a digital service tax, which shall be payable on income derived or accrued in Kenya through a digital market place. If approved, Kenyans will pay 1.5 percent digital services tax on the gross transaction value, payable when making  payment to the service provider.
Treasury also plans to increase the upper cap for residential income subject to the 10 per cent tax rate from Sh10 million to Sh15 million.
The Treasury CS had indicated that he was planning to reverse the decision that had scrapped taxes on a host of basic commodities in efforts to cushion Kenyan's against the Covid-19 pandemic. He is also expected to explain how Kenya will pay for the Sh904.7 billion budgeted for public debt servicing expenses in the Consolidated Fund Services (CFS).
The budget document notes that CFS expenditure, projected at Sh1.04 trillion, will consume 55 per cent of all the revenue that the government hopes to collect in the new year.
In the budget, Treasury is staring at a budget deficit of Sh835.9 billion, which can only be financed through additional debt.