Food, fuel prices major concern ahead of budget

Tax experts, consumer lobby calls for measures to cushion public.

In Summary

• Treasury CS Ukur Yatani is this week expected to present in Parliament the 2022/23 financial year’s government spending plan, proposed at Sh3.3 trillion.

•This could however go up on adjustments as current MPs' seek exit packages and car grants for new legislators to come after the August polls.

National Treasury CS Ukur Yatani during a past budget reading event/FILE
National Treasury CS Ukur Yatani during a past budget reading event/FILE

The high cost of living driven by among others, high taxation and rising fuel prices, top the list of concerns by consumers ahead of Thursday's budget prentation.

National Treasury CS Ukur Yatani is this week expected to deliver in Parliament the 2022/23 government spending plan, proposed at Sh3.3 trillion.

This could however go up as current MPs' seek exit packages, while car grants for new legislators to come after the August polls needs to be factored in.

Cooking gas, kerosene, taxes on basic foodstuff, high fertiliser prices and medical insurance for the elderly are among areas Yatani has been asked by tax experts and lobby groups to look into, to cushion consumers.

The Consumer Federation of Kenya (Cofek) proposes that VAT on cooking gas be abolished, or charged at eight per cent similar to petroleum products.

Gas prices have more than doubled in the last two months, making the commodity unaffordable. 

“The purpose of this is to remove the burden on Wanjiku who rely on LPG for cooking, and to help increase uptake of this clean cooking energy,” Cofek Secretary General Stephen Mutoro says in a memoranda to Treasury.

Cofek has also proposed that the anti-adulteration levy on kerosene be reduced by Sh9 per litre of the customs value of the illuminating kerosene, payable by the importer at the time of importing.

“There is need to cushion poor households from high kerosene prices given that kerosene is the only fuel product affected by the Anti-adulteration levy,” Mutoro says.

Cofek also seeks to have individuals aged 70 years or above exempted from paying income tax from sources such as pension, property and agriculture, while medical insurance for persons above 55 years of age be zero rated to encourage uptake by the “weak and retired”.

To cushion smallholder farmers and further grow the potential of food security, the government should consider zero rating fertilisers, pesticides and basic farm inputs bought for non-commercial use, it says.

The government should also remove tax on internet, it says, to support growth of e-commerce.

It can then raise more resources with VAT on products, serviced and products sold through internet, Cofek notes.

To manage fuel prices, the government, through the National Oil Corporation should put in place strategic oil reserve to mitigate rise in month-on-month global prices.

Tax and Audit consulting firm-PKF has warned that the rising costs on petroleum products due to disruptions caused by the Ukraine-Russia war is likely to trigger “super-inflation” in coming months if they are not contained.

It has proposed the lowering of taxes such as excise, import duty, petroleum development levy, import declaration fee,railway development levy and VAT.

“These have a huge bearing on the pricing of products hence the need to reduce and lower the applicable taxes significantly in order to protect the Kenyan economy from an imminent collapse,” PKF said in a statement.

The government should also lower taxes applicable to importation and sale of basic foodstuff such as maize, wheat, soya meal and rice, which Kenya is a net importer.

It should also allow importation of genetically modified foodstuffs both for human and animal consumption, to help manage the ballooning import bill and ensure food security.

GMOs, which have been proven safe by accepted research, are typically cheaper in the international markets.

“To cushion farmers from high cost of fertiliser, the government should consider implementing a special relief on all taxes applicable on importation and sale of fertiliser, in order to enhance food security,” tax experts at PKF said during a per-budget forum in Nairobi, dubbed “state of the economy.”

The current financial year's budget is Sh3.6 trillion having shot up from a proposed Sh3.02 trillion the previous year, with funding gaps pushing the government to borrow to bridge the deficit.

In the next financial year, Treasury has cut development budget for key sectors ,aimed at  balancing spending which is expected to increase on recurrent expenditure.

Agriculture, rural and urban development's overall budget have been slashed to Sh64.9 billion from Sh75.7 billion in the current financial year.

Development spending is proposed at Sh39.7 billion down from Sh50.8 billion.

The executive’s budget has been increased to Sh2.02 trillion from the Sh1.89 trillion estimate for the current financial year ending June.

Parliament’s budget has been raised 1.57 percent to Sh38.48 billion, while Judiciary’s is up 5.39 percent to Sh18.88 billion.

Expenditure for counties is projected at Sh370 billion which is unchanged from the current budget, while priority expenditures to repay debt and honour pension claims under Consolidated Fund Services has increased to Sh864.13 billion from Sh718.32 billion.

According to Yatani, the budget remains focused on the “Big Four” Agenda and Post Covid-19 economic recovery.

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