REVENUE STRESS

Covid-19 hits revenue as Treasury projects Sh21bn loss

This is above the Sh172 billion forgone in reliefs extended by the President

In Summary

• The Treasury projects to collect Sh66 billion more in general taxes and Sh69 billion in VAT earnings.

• Fines, penalties, and forfeitures are set to increase by Sh170 million.

President Uhuru Kenyatta with other state leaders during the signing of a bill in 2018. /FILE
President Uhuru Kenyatta with other state leaders during the signing of a bill in 2018. /FILE
Image: /PSCU

Covid-19 has hit hard the National Treasury’s revenue projections, signalling tough times ahead for the government to meet its obligations.

Treasury Cabinet Secretary Ukur Yatani projects to collect Sh1.906 trillion in the next financial year, Sh20 billion below the Sh1.927 trillion projected this year.

The latter figure is short of the initial Sh2.15 trillion target when the current budget was approved.

 

The government gave up Sh172 billion this financial year to mitigate the effects of Covid-19.

Records obtained by the Star project a Sh21 billion fall in income tax revenue due to the tax reliefs initiated last month.

MPs approved President Uhuru Kenyatta’s move to reduce Value Added Tax to 14 per cent, and corporate tax to 25 per cent.

The Treasury projects to collect Sh19 billion less in Pay As You Earn (PAYE) remittances next year while corporate tax is set to go down by Sh32 billion.

Taxes on financial and capital transactions are projected to drop by Sh3 billion owing to a drop in earnings from capital gains tax.

Earnings from stamp duty are also set to reduce from the Sh11.3 billion set for the current year to Sh11.2 billion next year.

The Treasury projects to collect Sh65 million less in income from social security contributions.

 

The projected tax hole comes against the backdrop of a Sh823 billion budget deficit in next year’s budget – to be funded largely by borrowings.

On Wednesday, the World Bank approved a Sh106 billion soft loan for Kenya, days after the IMF extended a credit facility of about Sh78 billion.

Kenyans are, however, expected to fork out Sh107 billion more in tax changes affecting VAT and general taxes on goods and services.

The Treasury projects to collect Sh66 billion more in general taxes and Sh69 billion in VAT earnings following the proposed increment of taxes on basic commodities such as cooking gas, milk, unga, and bread.

The tax measures in the Finance Bill, 2020 are set to take effect in July if approved by Parliament. They are meant to shore up revenues to fund the 2020-21 budget.  

Excise duty is targeted to increase by Sh31 billion after the removal of exemptions applied to several goods.

The government intends to earn Sh30 million more from motor vehicle taxes while taxes earned through customs and import duty are set to increase by Sh16 billion.

On this, revenue from customs and other import duties are projected to increase by Sh13 billion whereas other imports-related taxes will raise Sh2 billion.

Income from grants is set to reduce by Sh10.4 billion of which earnings from foreign governments is set to drop from Sh10.5 billion to Sh2.3 billion.

Grants from international organizations are projected to go up by Sh1.4 billion while income from property is set for an overall drop of Sh97 billion.

State’s income from rent of government buildings is projected to go up by Sh400 million whereas interest earnings have reduced by Sh507 million.

Yatani seeks to raise Sh35 million more from rent of government buildings and houses with Kenyans set to raise Sh2.9 billion in charges for various government services.

The state intends to bolster its sales strategy to raise Sh3 billion more.  Fines, penalties, and forfeitures are projected to increase by Sh170 million.

Other earnings will be Sh1.9 billion in fees under the Traffic Act, Sh1 billion in land revenue and Sh23 million from registration of companies.

The Treasury further intends to net Sh38 million for business names, Sh98 million from registration of marriages, Sh345 million from business name searches and Sh105 million in public trustee fees.

Yatani has projected to collect Sh225 million for births and deaths registration, Sh99 million for IDs, and Sh801 million from certificates of good conduct.

Hiring of police officers is projected to raise Sh673 million,   immigration visas Sh3 billion and Sh1.6 billion from passport fees.

Work permits are set to raise Sh3.9 billion while Sh2.9 billion is targeted from other immigration fees and Sh67 million from EAC tourist visa fees.

Reduced court activities have resulted in a reduced projection of Judiciary earnings to Sh1 billion, which is about Sh600 million below this year’s.

Import declaration fee is expected to net Sh28.7 billion, an increase of this year's Sh2 billion.

 The Treasury is eyeing Sh651 million from cement levy, up from the Sh546 million projected this year.

Licences under the Traffic Act are projected to raise Sh2.5 billion, which includes earnings from vehicle registration (number plating).

Betting licences are expected to raise Sh258 million while Sh6.1 million is targeted from mineral export license fees and Sh19 million in prospecting fees.

 

- mwaniki fm