Budget focuses on key Jubilee projects ahead of 2017 poll

Wednesday’s budget will be focused on providing funding for key Jubilee manifesto projects in the run-up to next year’s General Election, Treasury secretary Henry Rotich said on Monday.

In a briefing Monday to Parliament’s Budget Committee on the Sh2.26 trillion budget, Mr Rotich said any new tax measures will be aimed at spurring growth and easing the cost of living for the poor.

Kenyans have taken in multiple taxes in the past three years of the Jubilee administration, including introduction of value added tax (VAT) on tax exempt products alongside increments in excise duty and fuel levy— boxing households into a tight fiscal corner.

“As you know we are approaching the end of the current administration and we will be moving towards implementing the business of government and ensure that all that was agreed in the manifesto is implemented,” Mr Rotich told the committee.

“We are also going to respond to the issues raised by Kenyans on the cost of living. We want to improve our tax system to be pro-poor, pro-growth,” he added.

Analysts said the Treasury should trim the budget and cut funds wastage in public offices to narrow the fiscal deficit that has in the past seen it borrow heavily, exposing taxpayers to high cost of loans.

This is especially as the Kenya Revenue Authority has consistently missed its annual collection targets.

“I think the fiscal side will have to do the heavy-lifting. In particular, I think we will need to throttle down on the spending side (preferably with some serious surgical work on the recurrent expenditure side),” said Aly-Khan Satchu, an independent analyst who runs Nairobi-based data vending firm Rich Management.

He warned against further tax increment, saying it could end up achieving little and cripple the economy as homes’ purchasing power declines.

“Trimming our cloth is the order of the day, I am afraid. The Punchbowl is no longer there and we need to tread with caution.”

Mr Rotich in February said that the Treasury was drafting amendments to the Income Tax Act to expand the tax net and rope in more people.

He said the draft Bill would be ready in June, setting the stage for a possible review of tax bands that have remained unchanged for over two decades. Income in Kenya is taxed on a graduated scale from 10 per cent for those earning Sh10,165.

The maximum rate of 30 per cent is applicable on all earnings above Sh38,893. “We want to look at the cost of living, improve the tax system and widen the tax net,” he told MPs on Monday.

The Kenya Private Sector Alliance (Kepsa) has proposed the removal of import declaration fee for local traders to make their products competitive in the regional markets.