Kenyans fear higher taxes to finance budget

Vegetable vendor says her business is dying as goods are costly

In Summary
  • Cofek says Treasury needs to set a realistic budget given expected fall in revenue projections
  • Kenya National Chamber of Commerce and Industry hopes CS Rotich will allocate funds to clear pending bills killing businesses
National Treasury CS Henry Rotich
DREAD: National Treasury CS Henry Rotich

Kenyans are worried this year's budget to be tabled in Parliament by Treasury CS Henry Rotich today will trigger a rise in the cost of food.

The high cost of living has seen citizens struggle to get basic needs such as food even as the Central Bank projects higher inflation towards the end of the year.

Sarah (not her real name), a vegetable vendor, told the Star her business is deteriorating as goods have high prices.

Customers are suffering as items such as onions are retailing at Sh20 a piece. We buy the onions from the farmers at Sh1,800 for 14kg, hence the high price we charge consumers,” she said.

Sarah expects the government to put in measures that will reduce the high cost of living.

The cost of living measure was at 5.49 per cent last month on account of favourable weather conditions which resulted in lower food prices. This was a 1.09 per cent drop from a high of 6.58 per cent in April.

However, Sarah said the long rains experienced in the country are not helping as farmers are incurring losses so they sell their produce at a higher price.

John (not his real name) who works in Westlands says the cost of food is extremely high and he struggles every day to put a meal on the table for his family.

Consumer Federation of Kenya chairman Stephen Mutoro said called for lowering  tax of basic commodities especially food and pharmaceuticals.

“The increment in taxes observed last year has been quite high for consumers and retailers,” Mutoro said.

During the budget speech last year, the CS Rotich proposed tax changes contained in the Finance Bill which later were signed into law.

The law led to higher taxation for cigarettes, wines and spirits and concessionary products.

The government expected to raise additional Sh40 billion to cover the budget deficit.

Mutoro said that the Treasury needs to set a realistic budget given the expected fall in revenue projections.

“We need to give new meaning to the budget. Rotich should give a clear track of the performance of this ending financial year, stating what was achieved and what will be resolved with clear justifications in the new financial year,” he said.

Mutoro urged the promotion of agriculture through tax relief on inputs and deliberate incentives in rural areas that face consistent food shortage.

Kenya Auto Bazaar Association secretary Charles Munyori said they hope the duty on imported cars would still remain even as the government pushes to phase out second-hand vehicles to a five-year age limit.

The move that is to take effect this July is intended to grow the local motor industry. However, it has been suspended to due to lack of public participation and Parliament's approval.

“We really don't know what to expect but it is our prayer that they do not increase duty," Munyori said.

Used cars are charged import duty at 25 per cent, excise duty based on the age of the car and 16 per cent valued added tax. Therefore, vehicles aged more than three years pay Sh200,000 as excise duty while Sh150,000 is paid for newer vehicles.

Kenya National Chamber of Commerce and Industry hopes CS Rotich will announce the allocation of funds to clear pending bills national and county governments owe suppliers and contractors.

Currently, the claims are estimated at Sh300 billion, a rise from Sh108.41 billion last financial year.

The business community also wants a reduction in the cost of electricity and relaxation of the tax burden.

“The operating environment for SMEs has noncompetitive policies that encourage international firms to win tenders and delayed payments that have sent hundreds of thousands of SMEs packing,” KNCCI said in a statement.

The chamber said the government should focus on widening the tax bracket to increase revenue rather than the subsequent rise in the cost of products and services.

Caroline Mutoko, a renowned journalist, said she expects Rotich to logically allocate financial resources. She expressed fears that the CS might resort to taxing everything like in Uganda where parliament passed new laws to introduce tax for use of popular social media platforms.

She added that the country needs to conduct a referendum to review the wage bill  as there are many useless positions created by the Constitution that eat into the country's budget.

Kenya's annual wage bill was expected to rise to Sh650 billion by the end of last year, equivalent to an annual 11 per cent increase.

The budget should influence Kenyans to spend more as this will spur the country's growth,” Mutoko said.

A recent report by Twaweza East Africa indicated that households that depend on casual employment experience the highest levels of food stress.