M-Pesa charges, kerosene, mitumba go up in Big Four budget

Campaigners from the Fight Inequality Alliance call on the Kenyan government to deliver a budget which will close the gap between the rich and poor during a march in Nairobi on June 12, 2018. /THOMSON REUTERS FOUNDATION/NITA BHALLA
Campaigners from the Fight Inequality Alliance call on the Kenyan government to deliver a budget which will close the gap between the rich and poor during a march in Nairobi on June 12, 2018. /THOMSON REUTERS FOUNDATION/NITA BHALLA

The prices of kerosene,

second-hand clothes and mobile transfers are set to shoot up after the government proposed new taxes to fund the Big Four agenda.

Treasury CS Henry Rotich yesterday announced increased taxes on several key consumer goods and services that will further burden the taxpayer.


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Rotich’s proposed Sh2.5556 trillion budget, reduced from the earlier proposed Sh3.07 trillion, has come with good and bad news for both the rich and the poor.

Workers will be forced to part with an additional tax of 0.5 per cent or Sh5,000, whichever is higher, from their monthly earnings to fund the Housing programme. The Big Four are affordable housing, universal healthcare, food security and manufacturing.

Employers will have to match their workers’ contributions through the National Housing Development Fund.

Also introduced is a 0.05 per cent ‘Robin Hood’ tax on any money transfers through financial institutions of Sh500,000 or more.

This means that anyone who sends Sh500,000 or more through financial institutions will have to part will have to part with Sh25,000 as tax.

The cost of sending money through mobile phones is set to shoot up following a proposed two per cent increase on excise duty charged on service providers.

Service providers are likely to pass on the burden brought by the 12 per cent tax to customers.

When Rotich introduced a 10 per cent excise duty on the service, leading mobile money provider Safaricom increased the charges on money transfers by 10 per cent.

As Uhuru’s second administration looks to boost the local textile industry, cheap second-hand clothes popularly known as mitumba, which most Kenyans depend on, will be hard hit.

Each unit of imported second-hand clothes and footwear will attract a new tax of $5 (Sh500) or a 35 per cent levy, whichever is higher, Rotich announced.

The majority of low- and middle-class Kenyans greatly depend on second-hand clothes and shoes, meaning they will be the hardest hit as the local textile industry looks to get back on its feet.

The government’s war on adulterated kerosene is also set to hit low-income earners, who depend on it, as Rotich plans to increase the excise duty on illuminating kerosene to Sh10.30 per litre.

This means that the current Sh84.10 per litre of kerosene will go up to Sh94.40 should Parliament approve the Tax Laws Amendment Bill.

Under the same tax proposal, Rotich looks to earn more from the rich and middle class by increasing excise duty for 2500cc fuel guzzlers from 20 per cent to 30 per cent.

Popular brands include Mercedes-Benz, Prado V8, Subaru and Toyota Harrier among others.

As the government tightens the noose on graft and increases efficiency of public spending, a new unit will be introduced to scrutinise government tenders and projects. All purchases will be regulated through standardised pricing for commonly used items.

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Public officers are set to gobble up more than half of Rotich’s budget, as salaries and other recurrent expenditures will take up Sh1.55 trillion.

Sh625.1 billion will go towards development, leaving Sh376.4 billion for county governments in a budget Rotich said involved careful balancing.

This year, Rotich fell short of his revenue target by Sh558.9 billion.

The CS intends to bridge the shortfall through borrowing from both local and international markets. He said Kenya’s presence in the international capital market will grow, an indication that the country could pursue another Eurobond issue.

The move to bridge the budget deficit is likely to push the country’s public debt above the Sh5 trillion mark. According to the Central Bank, the country’s public debt reached Sh4.96 trillion last month.

The budget largely geared towards enabling Uhuru’s ambitious Big Four agenda is themed 'creating jobs, reducing poverty, transforming lives and sharing prosperity'.

President Uhuru is betting on food and nutrition security, affordable housing, enhancing manufacturing, and realising universal heathcare as his key pillars in the next five years.

Sh460.2 billion is budgeted towards projects aimed at spurring economic growth and creating jobs through public-private partnerships.

Rotich yesterday said Sh82 billion will be pumped directly into the Big Four agenda, while sectors supporting dream projects, security, infrastructure, education and county governments have been allocated Sh378.9 billion.

Sh20.25 billion has been allocated to enhancing food and nutrition security by 2022.

Sh8.5 billion of that will go towards financing ongoing irrigation projects.

The rest will be used for fertiliser subsidy, crop insurance schemes, establishment of strategic food reserves, enhancement of cereals and armyworm mitigation, among others.

To reduce the cost of food and achieve security, the CS proposed to introduce incentives for post-harvest losses from 20 per cent to 15 per cent.

Other measures include enhancing large-scale production by placing an additional 700,000 acres through Public Private Partnerships under maize, potato, rice and feeds production; expanding irrigation schemes and securing water towers and river ecosystems.

Further, the government intend to upscale crop and livestock insurance with the goal of cushioning farmers against climate-related risks.

Sh44.6 billion has been set aside for providing universal healthcare coverage, while Sh6.5 billion has been allocated for affordable and decent housing.

The Treasury wants to spend Sh2.5 billion to support value addition and create jobs under the Big Four manufacturing pillar. It seeks to increase the sector share of GDP to 15 per cent by 2022.

Rotich said that the GDP growth will be realised through establishing leather parks and textile industries in various parts of the country, reviving and transforming industries such as the blue economy and manufacturing of construction materials, and re-establishing the automobile industry to make new vehicles more affordable.

Sh800 million will be used for the expansion of the Kenanie Leather Industrial Park and the Textile Development EPZ hub.

Sh1.43 billion will be used for the modernisation of Rivatex East Africa Ltd and Sh200 million for modernisation of the new KCC plant.


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To spur investments in manufacturing, Rotich said the cost of off-peak power has been reduced by 50 per cent. Energy is expected to drop by nine cents per kilowatt for selected investors.

On affordable housing, at least Sh6.5 billion has been proposed to increase the supply. The plan is to partner with the private sector to develop homes.

The government aims to deliver 500,000 housing units by 2022.

From the allocated fund, Sh3 billion will be used to construct affordable/social housing units by the government and Sh1.5 billion for housing for police and prison officers.

Another Sh1.5 billion will be used for the Civil Servant Housing Scheme Fund to support the off-take.

An additional Sh18.4 billion will be used to support the servicing of land in various towns to bring attract private developers.big four budget.

At least Sh2.0 billion will be used for free Primary Healthcare, Sh800 million for a Health Insurance Subsidy Programme and Sh2.5 billion for the roll-out of universal health coverage to four counties on a pilot basis. These counties are Kisumu, Nyeri, Isiolo and Machakos.

A total of total Sh13.7 billion will support the Free Maternal Healthcare programme and the leasing of medical equipment.

In view of the increasing cases of cancer deaths, Sh7 billion has been set aside for early screening and management; 23 scanners will be purchased.

In addition, Sh400 million will be used to establish a cancer institute.

Other sector allocations include Sh2.9 billion for Doctors/Clinical Officers/Nurses internship programme, Sh11.7 billion for Kenyatta National Hospital, Sh7.7 billion for Moi Teaching and Referral Hospital, Sh2.2 billion for the Kenya Medical Research Institute and Sh4.7 billion for Kenya Medical Training Centres.

Despite last year’s prolonged electioneering period coupled with drought and negative effects of interest cap, Rotich said the country’s economy for the last five years was resilient and expanded at the 5.6 per cent per year. This was more than growth posted during President Mwai Kibaki’s last term in office.

He said 898,000 jobs were created last year, compared to 833,000 generated in 2016-17.


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