BUDGET

Yatani targets parents, youth in 2020-21 budget

CS Yatani avoids unga talks

In Summary

• Government spending is projected at Sh2.79 trillion.

• Diapers are poised to be cheaper in the near future as Treasury moves to remove duty on raw materials.

Treasury CS Ukur Yatani outside Parliament Buildings on June 11, 2020.
BUDGET: Treasury CS Ukur Yatani outside Parliament Buildings on June 11, 2020.
Image: /FREDERICK OMONDI

Parents and students have received relief in this year's budget after being exempted from exam fee payment.

Duty on raw materials for the manufacturer of diapers, which take a huge percentage of household budgets, are also tax-exempt.

Nonetheless, the price of a wide range of food and non-food commodities remain intact, with some set to rise on high demand as the coronavirus ravages the economy.

 
 
 

National Treasury CS Ukur Yatani Thursday steered clear of the usual unga reprieve and sin tax on alcohol and cigarettes prevalent in previous budgets.

Instead, he announced short-term measures to create employment for the youth and protect local industries.

 

In the projected Sh2.79 trillion spending in the 2020-21 financial year, CS Yatani announced a waiver on examinations fee for all Standard 8 and Form 4 candidates.

The government will spend Sh4 billion to cushion parents from the fees, part of the Sh497.7 billion for programmes in the education sector.

“The government continues to make sustained investments in the education sector in order to enhance access to quality basic and higher education,” Yatani said when he presented the budget which kicks in on July 1.

The 2020-21 budget is focused on safeguarding jobs, businesses and cushioning vulnerable citizens against effects of Covid-19, the CS said.

The government is keen on rolling out an extensive economic stimulus programme to salvage the economy.

 

Diapers are poised to be cheaper in the near future as the Treasury sought to protect the local manufacturing in its tax measures.

“Kenya has the capacity to manufacture baby diapers. In order to support manufacturing of the products locally, all inputs for the manufacture of baby diapers will be imported duty-free under East African Community Duty Remission Scheme,” Yatani said.

 
 
 

In a move to appeal to the youth, Treasury has set aside Sh10 billion for the “Kazi Mtaani Programme” which seeks to employ at least 200,000 youth.

The programme, according to CS Yatani, will help address youth unemployment and empowerment in urban informal settlements.

The programme will be targeting unemployed youth in the major cities and urban settlements of Nairobi, Mombasa, Kisumu, Eldoret, Nakuru and other major towns.

“The youth will be engaged in fumigation, stormwater drainage works, cleaning of markets and informal settlements, rehabilitation and maintenance of 22 access roads, footbridges and footpaths and other environmental management activities,” he said.

Tax measures approved in April to cushion Kenyans from effects of Covid-19 remain in place.

They include Value Added Tax (VAT) rate of 14 per cent which was lowered from 16 per cent, reduced tax rates for both corporate and personal income (PAYE) at 25 per cent from 30 and the 100 per cent tax relief for persons earning a gross monthly income of up to Sh24,000.

To support the micro, small and medium enterprises, the turnover tax rate remains at one per cent after it was reduced from three per cent.

The nearest Yatani came to unga, which appeals to most households, is the proposal to exempt maize or corn seeds from the Value Added Tax, a move that will greatly benefit farmers.

Ambulance services have, however, been exempted from VAT in addition to medical, nursing and dental services which are currently exempted, to cushion Kenyans from the high costs of such services.

Treasury is also on the verge of implementing an eight-point Economic Stimulus Programme to cushion vulnerable citizens and businesses, particularly those affected by the Covid-19 pandemic.

The stimulus programme, Yatani said, will focus on keeping the food supply chains functional while promoting the use of locally produced goods and services, thus securing the livelihoods of daily wage earners.

“Mr Speaker, we have set aside Sh56.6 billion to cater for the various thematic areas of this programme,” Yatani said during his address in Parliament.

The CS who was presenting his first budget raided entities of tax exemptions, noting low revenue emanating from the economy which is reeling from effects of Covid-19.

According to Yatani, tax revenue foregone by the government through tax incentives or exemptions amounted to Sh535 billion or six per cent of GDP in 2018, which is considered one of the highest levels globally.

“Whereas these tax incentives are well intended, they have limited the capacity of government to fund critical expenditures,” he said.

Local steel, textile and leather sectors have something to smile about for the next one year as Yatani staved off cheap imports to support local production.

To promote the manufacturing of clothing and apparels including fashion and design, inputs used in the textile and apparel sector will be imported duty-free, the CS announced.

Inputs for assembly or manufacture of mobile phones will also be imported duty-free under the East African Community Duty Remission Scheme.

To protect the leather and footwear sector, imports of such products will be slapped with a specific rate of duty in addition to 25 per cent duty rate, which were granted last year.

“This will also safeguard government revenues by curbing undervaluation on such imported products,” Yatani said.

Yatani also sought to protect local producers of electrical parts and accessories. He has raised duty on imports to 35 per cent from 25 per cent for one year.

The government will also be going after businesses on digital platforms with a service tax on the value of transactions at the rate of 1.5 per cent once the Finance Act is enacted.

The government also plans to widen the tax bracket on property owners increasing the annual earnings threshold from Sh10 million to Sh15 million.

(edited by o. owino)