Treasury has achieved some targets but it has more to go

With every budget comes promises and last year’s was no exception. As is the norm, the 2014/15 Budget Speech came with a significant number of promises, all aimed at improving the economy and living standards.

Among the areas that the Cabinet secretary for National Treasury, Mr Henry Rotich, focused on were improving security, employment creation, reducing the cost of living and strengthening devolution.

While some of these promises have been achieved, a few others are yet to be met. The CS allocated a significant amount of money to take care of security, but insecurity remains a big challenge.

As part of the achievements in this area, the installation of a security surveillance system appears to be on course. Security at the Jomo Kenyatta International Airport has also been tightened. The government also introduced police medical schemes to boost the welfare of officers.

During the year, the CS introduced the digital government payment gateway. As a result, the government rolled out the e-Citizen platform to allow Kenyans to apply and pay for government services online. Though not fully employed in all sectors of government, e-citizen has improved efficiency, sealed loopholes and raised more revenue for the government.

The rollout of iTax by the Kenya Revenue Authority, for online filing of tax returns, has been a key measure undertaken to ease doing of business in Kenya. The introduction of the award winning Huduma centres has also transformed the accessibility of government services to the public.

The government has, therefore, made some significant strides in achieving the promises of the 2014/15 Budget. However, a few of them remain unaccomplished, especially on tax measures, where the CS had promised to streamline administrative tax procedures.

Through the Finance Bill 2014, he promised tax amendments aimed at facilitating the growth of private enterprises to create jobs, reduce cost of living as well as tax administration reforms to ease compliance.

One of the key tax reforms that the CS promised was to increase duty rates on a wide range of iron and steel products, which are available locally, from zero per cent and 10 per cent to 25 per cent.

This was meant to protect local manufacturers and drive local production.

In addition, import duty on these products was to be increased to create employment and raise more revenue for the government. This proposal was dropped by the Finance Act 2014. We hope the Finance Act 2015 will consider this proposal, as many local manufacturers of iron and steel products cannot effectively compete with imported products.

One of the other eagerly awaited proposals was the harmonisation of tax laws. Under this, the CS promised to ensure all the tax procedures that are general are contained in one law. When implemented, this will make tax administration easier and reduce the cost of compliance.

Notably, the CS promised that through his measures, the economy would grow by 6.1 per cent, up from 5.7 per cent in the 2013/14 fiscal year. On the contrary, it grew by 5.3 per cent, which was lower than the previous year.

This significant variance between the projected and the actual growth may largely be attributed to insecurity that has hit Kenya recently, affecting tourism and the country’s favourability as an investment destination.

The National Treasury boss also promised prudent fiscal and monetary policies to achieve low inflation and a stable exchange rate. This has been a challenge, with inflation rate increasing from 5.7 per cent last year to 6.9 per cent in the current year.

The shilling has also steadily depreciated against major currencies, especially the dollar. The government could consider implementing a monetary policy that helps the country achieve and maintain a favourable balance of trade.

The CS outlined actions to reduce the cost of living and improve the welfare of Kenyans. In this regard, he promised to improve food security in line with the government’s pledge to put one million acres under irrigation by 2017.

Of these, 10,000 acres would be under cultivation in the current financial year.

With only 1,000 acres cultivated, there remains a lot to be done. Food security will be a key result area for the government, as agriculture, at 27 per cent, still remains the biggest contributor to our Gross Domestic Product.

This afternoon, Mr Rotich will present the 2015/16 Budget, outlining the government’s plans for the coming year. Understandably, the government has faced various challenges that could have adversely affected the implementation of some of the plans outlined last year.

Nevertheless, a review by the CS of what was planned, the progress made so far and the plans in place to achieve full implementation is necessary, to instil confidence in the business community and Kenyans at large.

Mr Kinuthia is a tax director with KPMG Kenya ([email protected]). The views are those of the author and do not necessarily represent those of KPMG.