Inside President Ruto’s first Sh3.6 trillion budget, taxation plans
Friday April 28 2023
President William Ruto’s administration plans to raid taxpayers for an additional Sh392.70 billion and cut fresh borrowing to fund his first budget of Sh3.6 trillion for the year starting July.
Documents tabled in the House last evening show that Kenya Kwanza’s administration’s first budget will expand by Sh215.03 billion compared with the current one prepared by its predecessor.
Treasury Cabinet Secretary Njuguna Ndung’u projects ordinary revenue receipts — comprising taxes, levies, rent of buildings, fines and forfeitures— will rise 17.3 percent to Sh2.57 trillion.
The Kenya Revenue Authority (KRA) collections, which form the bulk of cash streams for the government, are forecast to grow to Sh2.43 trillion from the current target of Sh2.04 trillion for the year ending June.
The Treasury will be leveraging on increased use of data and linkages between KRA systems with third parties such as banks and mobile money platforms like M-Pesa to spy on taxpayers’ activities, use of Internet-enabled cameras at excisable goods processing plants and full rollout of digital electronic tax registers (ETRs) to grow revenue.
Read: Ruto tweaks Uhuru budget, grows recurrent by Sh87.6bn
“[The Treasury plans] to support mobilisation of tax revenue through leveraging on automation of systems for all key government entities, integration of KRA tax systems with critical government systems to allow seamless exchange of information for a 360-degree view of the taxpayers’ economic transactions and enhancement of the KRA capacity on big data analytics to drive compliance interventions,” Prof Ndung’u wrote in the documents to lawmakers.
Taxes on earnings by workers and farmers are projected to increase to nearly Sh1.2 trillion from an estimated Sh1 trillion for the current year, Value Added Tax from Sh587.7 billion to Sh703.3 billion, excise duty from Sh297.2 billion to Sh352.7 billion, while import duties are seen growing to Sh173.3 billion from Sh145.9 billion.
The Treasury says the increased budget will be spent on implementing Dr Ruto’s Bottom-Up Economic Transformation Agenda (BETA) “geared towards an economic turnaround and inclusive growth”.
“Special focus will be placed on the interventions that reduce the cost of living, increase employment, achieve equitable distribution of income, enhance social security, expand the tax base for more revenue and increase foreign exchange earnings,” Prof Ndung’u says.
The current administration is already facing a backlash from the opposition led by Dr Ruto’s rival in the last year’s election, Raila Odinga, for failing to lower the cost of living as pledged during the campaigns.
The opposition has called for the reinstatement of consumption subsidies on basic commodities such as staple maize meal.
Kenya’s inflation — a measure of the cost of living over the last 12 months— remained unchanged at 9.2 percent in March, compared with the prior month, on persistent pressure from food prices and energy costs.
In the proposed budget, the expenditure for the Executive (national government) has been raised by Sh120.17 billion to Sh2.16 trillion, while the Judiciary’s has remained largely flat after being raised to Sh22.99 billion from Sh22.02 billion in the current year.
Dr Ruto is presiding over one of the more bloated governments since independence, having increased State departments to 51 from his predecessor’s 44 and further appointed 50 chief administrative secretaries against 29 previously.
The budget for Parliament has been cut to Sh40.4 billion from Sh50.72 billion, while the counties’ total expenditure has been reduced to Sh385.43 billion from Sh399.60 billion.
The Treasury projects the deficit in the budget to drop to Sh663.5 billion from the projected Sh824 billion in the current fiscal year, with the Ruto administration expected to borrow to refinance maturing debt as opposed to funding new projects.
Read: President Ruto cuts current budget spending by Sh14bn
Dr Ruto has insisted the KRA has the potential to raise Sh3 trillion in tax receipts.
“It is not an accident that revenue mobilisation, though improving, remains far below its potential. Taxpayer apathy is rife,” he said before managerial changes at the KRA that saw former commissioner-general Githii Mburu pushed out.
“Potential and actual taxpayers are terrified of KRA and even traumatised by the sight of its officials.”