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Editorials

EDITORIAL: Proposed changes to Finance Bill timely

Central Bank of Kenya
The Central Bank of Kenya building in Nairobi. FILE PHOTO | NMG 

The government has for many years been making budgets without certainty of getting the required revenue from taxes to finance the expenditure due to the delayed presentation of the Finance Bill to Parliament.

Presenting the Finance Bill weeks after the Budget has been read in June, and its passing much later in September has been making the Kenya Revenue Authority’s (KRA) task of meeting its tax collection target very difficult, if not impossible.

The Treasury has also been making revenue projections based on tax law changes that are yet to be approved. Once MPs reject some of these taxation measures, the Treasury is pushed back to the drawing board to issue supplementary budgets that cause havoc on ministerial spending and work programmes.

It is for this reason therefore that we support the proposed law change in the Business Laws (Amendment Bill), 2019 to have the Finance Bill presented to MPs in April and have it approved as law by the President by June 30. It will allow Kenyans, either through their elected representatives or in public hearings on the budget, to refine both expenditure and revenue/income plans at the same time, allowing for more realistic budgeting plans that will reduce the overhang that has been pushing the Treasury to borrow heavily.

That there is a need for this law is not in doubt. In recognition of the need to align new taxes with the start of the fiscal year, the Treasury previously relied on the Provisional Collection of taxes and Duties Act of 2018 to provide for earlier collection of dues before they were passed as law in the Finance Act.

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This stop gap measure had its weakness though, where some new taxes would be rejected in the Finance Act, leaving the taxman facing the dilemma of how to refund those who had already paid under the provisional Act. For the KRA, which has perennially faced criticism for failing to meet collection targets, the move to ensure that the tax measures are in place by July 1 will enhance its capacity to close the deficit it has been facing.

The private sector also stands to benefit from the alignment of the revenue and expenditure plans. The period between the reading of the budget and the passing of the Finance Act has proved to be one of great uncertainty for businesses, where they are unable to plan their finances and face shocks of tax changes midstream.

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