Stung by the high cost of living and rampant unemployment, Kenyans want the cost of fuel and household goods reduced in the Sh3.08 trillion budget that National Treasury Cabinet secretary Henry Rotich will present in Parliament this afternoon.
Stakeholders in various sectors hope that the Treasury chief will put in place mechanisms that will ease cost of doing business and spur growth in their specific industries.
Today’s Budget Statement is being presented against a backdrop of a standoff between members of the National Assembly and Senators over allocations to the counties.
The senators have proposed Sh335 billion be allocated to the counties while their counterparts in the National Assembly are insisting on Sh314 billion. On Monday, a committee comprising members from the two Houses failed to agree on the dispute.
And yesterday, senators met with the Commission on Revenue Allocation (CRA) and vowed to block Rotich from presenting the budget, terming it unconstitutional.
Management of taxes
Makueni Senator Mutula Kilonzo Junior, a member of the committee was, however, optimistic that a mediation meeting slated for this morning will help mobilise consensus to avert a crisis, but warned: “But if for any reason, we are going to be taken to a meeting tomorrow (today) to appear as if we’re rubber stamping the budget…we are not going to agree to those things”.
On the expectations, those who spoke to People Daily did not mince their words; they not only want expeditious and speedy convictions for those charged with theft of public funds, more accountability on the management of taxes.
“We are struggling,” said Juventina Nyanchoka, a fruits and vegetables seller in Nairobi West, adding that she wants to see “big fish” being jailed and the government going slow on borrowing”.
David Kasyoki, also a small-scale trader, who operates an electronics shop is among those, who suffered when customs officials from Kenya Revenue Authority blocked the release of several containers alleging non-payment or underpayment of duty.
“The taxes have increased, and this is affecting incomes. My customers have reduced, and my business is suffering,” he said.“Rotich needs to bring down the price of maize flour. It is too high. It is okay to increase tax on alcohol and cigarettes but not food.”
The same sentiments were expressed by Francis Njau, who ekes out a living washing cars. “Right now, it is almost impossible to draw up a household budget and stick to it. Rent is also too high,” said Njau.
Others see a link between the high tax on fuel and the impact on the cost of locally produced goods and food.
The high cost of food items is hurting households in the lower income bracket despite a stable shilling and data from Central Bank of Kenya indicating that inflation dropped in May because of improved rainfall.
“If the government can lower the cost of fuel, I believe this will offer some relief. Compared to last year, life is difficult and it looks like it is getting worse by the day, ” said Moses Mutai, a security guard in Nairobi.
Daisy Wanzala, a public relations practitioner said if the government is raking in billions of shillings in the form of Pay as You Earn (Paye), it should be more accountable to the taxpayers.
“If I’m being taxed under the affordable housing plan, for instance, I need to be sure I will have a choice on where I want to live and the type of house I prefer. Thus far, this plan does not look feasible to me. There should have been better communication and public participation,” she said.
Matatu Owners Association (MOA) chairman Samuel Kimutai says he would like Treasury to put in place mechanisms to remove all static police stops which have turned into cash cows. He said the industry would also benefit from an electronic payment systems.
Manufacturers also want to see a review in policy relating to VAT zero-rating and exemption and propose moving their products from VAT exempt to VAT zero rate to allow them to claim the input VAT under zero rating as opposed to exempt.
“VAT exempt forms part of their production cost. Alternatively, government should introduce a token VAT of a lower rate to allow offsetting of input VAT,” proposed Kenya Association of Manufacturers (KAM) chief executive Phyllis Wakiaga.
KAM also wants removal of Import Declaration Fee (IDF) and Railway Development Levy (RDL) on all industrial inputs – basic raw materials and intermediate inputs.
The Institute of Certified Public Accountants of Kenya (ICPAK) wants Treasury to rationalise public expenditure by reducing unwarranted expenses such as travel, motor vehicle maintenance, training and hospitality.
Institute chair Rose Mwaura expects strict adherence to elimination of wastages as pointed out by the Auditor General and Controller of Budget reports.
“We want value for money for taxpayers. Are services commensurate with the taxes paid? That is the question,” she posed, adding that she wants to see enhanced war on corruption with tangible results and recovery of stolen property.
Rotich is expected to deal with the wage bill proposals by Salaries and Remuneration Commission on staff rationalisation at the two levels of government; the recent debate on allowances for teachers, trade unions, MPs and audit committees.
ICPAK also expects Treasury to put in place plans to deal with pending bills which have crippled government ability to deliver meaningful changes to citizens. Suppliers have for a long-time decried delays to settle arrears running into billions.
Currently, the two levels of government owe suppliers and contractors approximately Sh300 billion.
Mwaura further suggests that the Public Procurement and Assets Disposal Act 2015 should be amended to compel the National and County Governments to pay suppliers and contractors within 30 days.
She said increase in public debt repayment and other statutory obligations such as pensions implies that little is left to be shared between the two levels of government.
“Currently our debt stock is past Sh5 trillion mark, with more than Sh600 billion spent on debt service,” she pointed out.
In recent years, public expenditure has been growing at a faster pace than revenue, leading to huge budget deficits and ICPAK proposes government to consider a Public Private Partnership framework as a better alternative to dealing with the problem.
ICPAK hopes Treasury will energise key sectors of the economy, especially the major income earners such as services sector, agriculture, manufacturing and tourism.
Rotich presents the Budget Statement for the next financial year that begins on July 1 amid dwindling tax collections, revenue leakages, ballooning public debt and inflationary pressure fears.
With KRA’s record of missing collection targets recently, the CS has to walk a tight rope to juggle numbers to plug the Sh608 billion budget deficit.
“Considering that the income tax contributes more than 40 per cent of the revenues, there is a high expectation that overhaul of the income tax legislation expected during the 2019/20 fiscal year will widen the tax net as we hope it will borrow from best international tax practices,”said Alex Ngingo, tax manager at EY.
Of the Sh2.08 trillion total domestic revenue projection in 2019/20, Sh1.877 trillion is expected to come from local taxes and Sh203 billion through Appropriations-in-Aid (AIA).
“As government borrowing and higher taxes remain the easiest option for government to finance the budget, it may not yield the desired revenues in a depressed economy. Kenya should avoid the debt trap at all cost, tax revenues should cover recurrent expenditures and a larger portion of development expenditure,” Ngingo said.
Against the backdrop of massive budget hole, Rotich will be in the market for more borrowing, a move bound to sink the country deeper in debt that has surpassed Sh5.5 trillion.