Kenya Budget: Tougher times ahead

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Kenyans will need to brace for tougher times ahead as the government released its budget estimates for 2014/15 that did not do much to tame the escalating cost of living.

Kenya’s Finance Cabinet Secretary Henry Rotich presented to Parliament a whooping $14 billion budget that was largely unclear on funding mechanisms in the wake of a previous budget whose funding hole still remains unresolved.

Most Kenyans had expected the budget to address the spiraling cost of basic commodities that has seen inflation increase four-fold in the last one year. Rotich’s budget however fell short of slapping further increment to the prices of these commodities.

Apart from the high cost of living, Kenyans are concerned about security in the wake of sustained terrorist attacks fronted by Al-Qaeda affiliate Al-Shabaab. Rotich allocated five percent of the total budget to security.

All indications were that Kenyans could be taxed even more to finance that ambitious budget; this is despite the fact that most of them can barely afford the current taxes. Analysts we quick to criticize the government led by President Uhuru Kenyatta for being inconsiderate and lacking ideas on prudent economic management.

Several painful tax measures could be in the pipeline as the government through the budget hinted as increasing income tax for salaried employees to finance the budget.

“83.6 per cent of the budget will be funded by Kenyans themselves by way of taxation. The rest will be mitigated through appropriations in aid where our development partners will come in handy,” said Rotich.

In the last budget, the government introduced VAT on previously untaxed basic commodities such as basic food items and sanitary towels in what has seriously impacted on the cost of living and slid most Kenyans into absolute poverty.

“To sustain the momentum of tax reform and modernization, we will review the Income Tax Act from July this year. During this review, we shall consider the many submissions presented by stakeholders, in addition to benchmarking the new Bill to international best practices,”  the CS said while presenting the budget speech to parliament last week.

Multiple and competing taxation laws have put Kenyans in a situation where they are currently ranked among the most taxed lot in the world. Ironically, the Kenya Revenue Authority (KRA) which is the body that collects taxes has repeatedly fell short of the target in what most economic analysts attribute to corruption and loopholes that enrich a few members of the ruling class.

Among the other proposals by Mr. Rotich were widening the tax bracket to ensure that they net more Kenyans to contribute towards revenue generation. Kenya is one of the countries with the highest number of tax evaders; some of them established business magnates.

Kenya’s working lot that falls within the tax bracket are at a paltry 2.5 per cent of the population. Analysts say the government should instead of tightening the noose around the working class, create more employment and business opportunities, get more people working and widen the tax bracket.

Kenyatta’s government has lined up several capital intensive projects that have driven up the budget figures. Some of them include infrastructure projects such as the controversial Standard Gauge Railway and Northern Transport Corridor which will gobble billion of shillings for the next couple of years.

SOURCE: Busiweek, June 15th 2014: