Budget 2019: Treasury misses the mark, no relief for Kenyans

Treasury CS Henry Rotich’s presentation on the financing of the 2019/20 budget estimated at Ksh.3.02 trillion has missed its mark in providing any substantive gain to Mwananchi, experts reckon.

While the lack of any solid relief to the average Kenyan was highly anticipated under the now fiscal consolidation straight jacket by the State, Rotich’s budget statement brought on board a number of tax measures to impact on revenue mobilization.

The budget statement for instance brought relief to small and medium enterprises (SMEs), retaliating on the government’s prompt payment plan in a view to improve on the unit’s the cash-flow who make up Kenya’s enterprise backbone.

Further, SMEs are to receive a waiver on outstanding penalties and fees on overdue taxes should the entities agree to be on boarded on the Nairobi Securities Exchange (NSE) Growth Enterprise Segment (GEMS)

“Small businesses generally carry the weight of the economy. The entities have however seen a hike in pending bills accruing back to the government and can count relief from the fast tracking of payments,” ICPAK Head of Policy Elius Wakhisi said.

The list of benefits, however, abruptly ends here with further tax measures missing the point in relieving Kenyans from already high tax burdens.

Key additions in the tax measures presented by the Treasury Cabinet Secretary are targeted at high net-worth individuals and ‘sinners’.

Treasury has for instance proposed the increase of capital gains tax by an additional 7.5 percent to 12.5 percent in a move to ensure the rich pay for their fair share of tax from earnings made through property transfers bringing the effective rate close to the East African 18 percent average.

Further, the Planning Ministry has further laid eyes on the ‘sin tax’ basket increasing the excise duty on alcohol and tobacco by a further 15 percent.

However, according to KPMG Tax Patner Caxton Kinuthia, the revamped tax measures fail to impact on the essential goods basket for Mwananchi proving little to no impact on everyday life.

“The ordinary Kenyan only cares for the impact on day to day life. None of the tax reforms touch on essential such as maize flour and petroleum. I wouldn’t anticipate any changes to the already tough economic burden on Mwananchi,” he said.

While some Kenyans may have looked forward to relief setting policies, Thursday’s budget statement leaves Mwananchi barely a step up from the floor they laid on in the ending financial year defined by significant past tax additions across the 2018/19 financial year.

Value added tax (VAT) on petroleum products to an effective eight percent rate and additional excise duty on mobile-money transfers implemented in September 2018 makes up some of the Kenyan prevailing sticking points.

Even with the additions targeted at high-net worth individuals, Cytonn Investments analyst David Ngugi argues the budget statement composes of mere blanks having sided with none of the socio-economic demographics.

“A majority of Kenyans were afraid of the State’s budgeting options ahead of the budget statement presentation. We have however seen key measures aimed at capital gains and sin tax. This measure barely scratches the surface in impacting low-income households,” he said.

Rotich hopes, through the upcoming Finance Act, to increase domestic revenue mobilization by a further Ksh.37 billion to the end of June 2020, amid a budget deficit of Ksh.607.8 billion.