2021/22 BUDGET

Treasury to raid gamblers, boda bodas to fund Sh3.6trn budget

Yatani imposes a 20 per cent excise duty on betting; raise excise duty on bikes

In Summary
  • Yatani raised the price of motorcycles by increasing excise duty by 15 per cent
  • He maintained the status quo but raided secondary needs, importers of finished products and tax evaders. 
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

Gamblers, smokers and boda boda operators were the easy prey the National Treasury went after for funds for its historic Sh3.6 trillion budget. 

National Treasury Cabinet Secretary Ukur Yatani sought to soften life for families reeling from Covid-19 shocks and raise cash for the financial year.  

The government abandoned the well-trodden path of targeting common domestic needs in its tax policy to raise revenue and instead went for secondary needs, importers of finished products and tax evaders. 

Yatani imposed a 20 per cent excise duty on betting, meaning a gambler who wins Sh1,000 must hand over Sh200 in taxes. He said it was one way of discouraging betting in the country.  

The price of motorcycles will also rise after Yatani increased excise duty by 15 per cent from the current Sh11,608.23 per unit.

This new tax measure is expected to hit hard the boda boda sector, which has grown into a multi-billion enterprise.

Data from the Kenya National Bureau of Statistics shows the sector generates over Sh300 billion per year. The revenue dwarfs the amount made by Kenya's most profitable listed firm, Safaricom. 

The increase in motorcycle prices is also likely to hurt millions of families surviving on the trade. 

To encourage local manufacturing, the government has introduced a tough custom regime on imported finished iron and steel products. The move is likely to push up construction cost. 

It has also introduced a 25 per cent excise duty on imported leather products, footwear and furniture. 

It has exerted pressure on nicotine pouch users, charging an excise duty of Sh5,000 per kilo. 

The government has retained current tax measures on inputs for the manufacture of baby diapers at zero per cent under Duty Remission scheme, a relief to millions of parents. 

As a tradition, Treasury seemed to spend above its income in the 2021-22 budget planning. It counted on taxes, grants and borrowing to fund it. 

The budget for the new financial year will surge in excess of Sh800 billion from the current Sh2.81 trillion to fuel the economy.

Kenya is targeting Sh210 billion more in taxes in the financial year starting July 1 to feed its historic Sh3.6 trillion budget. 

This is despite the economy slowly recovering from the ravages of the Covid-19 pandemic that crippled business and rendered at least two million people jobless. 

The government is targeting Sh1.78 trillion from taxpayers in the next financial year up from Sh1.57 trillion in the current financial year. 

It expects to collect Sh835 billion from employees, an increment of Sh102 billion compared to the target set for the current year despite a double increase in joblessness due to Covid-19. 

The latest Quarterly Labour Force Survey by the Kenya National Bureau of Statistics shows that the rate of unemployment doubled in the quarter ended September last year to 10.4 per cent from 5.2 per cent same period in 2019. 

Covid-19 pandemic had rendered at least two million people jobless during the period under review. 

Income tax accounts for at least 50 per cent of the country's total domestic revenue collection. 

Although Treasury expects the economy to rebound faster, experts are worried that uncertainty still lingers as more severe variants of Covid-19 are reported globally.   

''We all are optimistic, but Covid-19 is still a threat. Where will the exchequer get the deficit from if the situation persists and throws more employees in the cold? Targeted income tax is extremely ambitious,'' independent economist Robert Kaberi told the Star. 

The government is expecting to collect Sh473 billion in Value Added Tax in the new financial year, Sh80 billion more compared to the current financial year. 

It plans to collect Sh241 billion in excise tax and Sh119 billion from import duty. 

Despite high tax expectations amid low collection, Treasury has a huge budget hole of close to Sh1 trillion. 

The revenue agency has missed its tax targets for the past five consecutive years. 

The Consolidated Fund budget, which funds debt repayments and salaries for constitutional commissions, has shot up by 23 per cent to Sh1.3 trillion.

The bulk of the Sh253 billion increase will go towards servicing Kenya's mountain of debt. Counties will get Sh370 billion.

To make ends meet, the Treasury plans to borrow over Sh938 billion to fill the shortcoming in tax revenues. It means the country’s public debt will swell further.

Kenya’s public debt began to balloon in 2013 due to increasing government spending plans, forcing it to take loans to support the budget.

The public debt has nearly quadrupled. Statistics from the Central Bank show the public debt was Sh1.8  trillion in January 2013.

As of the beginning of this year, this figure stood at Sh7.4 trillion. 

 

(edited by o. owino)