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).
PAYE Tax Calculator
Note: The results are not exact but very close to the actual.
