PREDICTABLY DIVIDED

Rotich petty in tax measures, say MPs

Critics cite boda boda insurance, supporters praise lowering VAT on petroleum products, raising capital gains tax .

In Summary

• Critics say revenue projection too ambitious, question how budget will be funded. 

• Praise for requiring government to pay suppliers and contractors in 60 days, lowering petroleum products VAT from six to two per cent. vatfron Oe

Treasury CS Henry Rotich makes his way to the Parliament for budget reading
Treasury CS Henry Rotich makes his way to the Parliament for budget reading
Image: ENOS TECHE

MPs are split on their views on tax measures sought by Treasury CS Henry Rotich to fund the Sh3.02 trillion budget.

While some lawmakers said on Thursday evening that the budget funding strategy is a relief to the poor, others scolded Rotich saying some measures are petty.

Critics cited the proposal for boda boda riders to be compelled to have third-party insurance, withholding tax for cleaning firms, caterer, and security companies.

 
 

A number of lawmakers who spoke to the Star after the budget was presented said the CS seems to have run out of options on which sectors to milk.

Minority leader John Mbadi (Suba South) played down the projected revenue, saying over the years it has fallen short and proven untenable.

He said the revenue targets will not be realised unless the Treasury employs a major policy redirection.

“The projected revenue is too ambitious. Treasury is projecting to raise over Sh2 trillion. We expected very clearly defined strategies. The issue of raising the capital gains tax will likely meet some resistance,” the Suba South MP said.

He said since there is no major shift in taxation, there are questions on how the budget will be funded.

“Even though he allocated Sh490 billion for the Big Four, there is no proper path for how this agenda will be achieved.”

Rotich told Parliament, "Boda boda is one of the largest employers of our youth. To mitigate  the risks posed by boda bodas, I propose all of them and tuk-tuks to have an insurance cover for its passengers and pedestrians."

 
 

Gatundu South’s Moses Kuria said a national conversation is needed on how to rationalise the recurrent expenditures as there is a lot of wastage.

“Let us go to every ministry and rationalise staff, especially entities with duplicate functions. This can only be done with the current era of the handshake,” the lawmaker said.

He called for more public participation in dealing with boda bodas. "There is a grey area on the matters of taxing [insurance cover for] boda bodas and SMEs," he said.

Makali Mulu (Kitui Central) said Rotich attempted to meet the expectations of Kenyans.

“The CS has taxed the rich more in his bid to expand the revenue collection base. We are also happy that the tax collection is being digitised, hence, this will help control the influx of counterfeits,” Mulu said.

Mvita MP Abdulswamad Nassir said, “The taxation [ insurance requirement] on boda bodas needs to be looked at keenly. I need to get a clear interpretation of what he meant”

Alego Usonga’s Sam Atandi said, “The CS seems to have run out of options. He has scored zero in efforts to expand tax brackets. We are not going to meet revenue targets and this will force us to do supplementary budgets.”

Nominated MP Godfrey Osotsi said taxing [requiring insurance ] boda boda operators is not only impractical but will also expose the operators to constant harassment from the police.

“The government should look at ways of ensuring safety of boda boda operators instead of policies that will make police harass the operators,” Osotsi said.

The leaders praised Rotich's proposal to reduce VAT petroleum products withholding tax, saying it will help stimulate the economy.

“I propose to reduce the rate of VAT withholding from six per cent to two per cent," Rotich said. "This will not only help reduce the build-up of VAT refunds, but will also help enhance the cash flow of our business community and stimulate economic activities and job creation,” Rotich said.

The lawmakers also praised move to require government to pay contractors and supplies within 60 days.

Rarieda MP Otiende Amollo said the budget has good aspects, though the tax measures which may require legislation by Parliament will likely meet resistance.

“The budget has attempted to address matters concerning the public. But the tax [insurane] on boda boda is impractical. A number of the feel-good factors like the debt recovery measures and growth prospects are not entirely truthful,” he said.

A number of lawmakers also promised Rotich an uphill task in his bid to increase the capital gains tax from seven per cent to 12.5 per cent.

The general feeling is also that the budget is not friendly to the youth, considering the small  allocation to the Sports sector.