Government raids poor pockets to fund Sh3trn plan

Thursday June 14 2018

National Treasury Cabinet Secretary Henry Rotich on his way to Parliament to present the 2018/2019 budget statement on June 14, 2018. PHOTO | SALATON NJAU | NATION MEDIA GROUP


Kenyans were Thursday evening bracing for harder economic times ahead after the government raided their pockets to fund its Sh3 trillion spending plan for the next 12 months, read out in Parliament by Treasury Cabinet Secretary Henry Rotich.

The speech, which largely avoided delving into the pain points of the proposed revenue enhancements to meet the huge expenditure proposals, only gave a few hints that will soon be laid bare in the Finance Bill.

In a sharp contrast to last year’s pre-election Budget that was laced with goodies targeting the common man – including cheaper maize flour and bread – this year’s offer is all about levies, taxes and more taxes, fixing 'Wanjiku’ in a tight financial corner.

From proposed tolling of various roads and raising of kerosene prices to increased license fees for small businesses, the Budget speech showed the government planned to squeeze more shillings out of the pockets of the common man.


It will cost more to send money via mobile phone, eat ugali and bread, and drive as fuel costs are set to rise and toll stations take even more from motorists as the government collects revenue to fuel its ambitious spending plan.


Banks will also have the leeway to tie heavy interest on loans under the proposed removal of the interest rates capping.

Mr Rotich’s goodies this time were focused at the macro levels of the economy, including improving local manufacturing through cheaper power and protection from cheap imports.

The trickle-down benefit of this plan will, however, depend on whether the manufacturers will be willing to pass down the lower costs of production to mwananchi.


“With revenue enhancement measures, we project revenues to rise by 17.5 per cent to Sh1.92 trillion, equivalent to 20 per cent of GDP, in 2018/19 from the estimated Sh1.66 trillion collected in 2017/18,” Mr Rotich said in his Budget speech.

The Kenya Revenue Authority, notably, had not hit half of its revenue targets as at April 2018.

Themed 'Creating Jobs, Transforming Lives and Sharing Prosperity', the expenditure plan, which is Sh400 billion more than last year’s Sh2.62 trillion, will be funded by debt to fill a 5.7 per cent deficit. Those opposed to Kenya's ballooning debt burden opined that this is financial suicide as the country can barely repay its existing loans.

Mr Rotich dropped his earlier proposal to increase income taxes to 35 per cent for Kenyans earning Sh750,000 and above per month, as well as his plans to increase taxation on gains made from sale of property.

Critics argue that Mr Rotich’s spending plan may have several riddles that will only be unravelled once the final tax approaches are laid bare in the Finance Bill.


Audit and tax advisory services firm Grant Thorton Kenya director, Mr Samuel Mwaura, said Mr Rotich should have taxed high earners more and allowed the common man to benefit from some of the proposals he made last year, many of which are yet to start trickling down.

“High net worth individuals got away with it this time, but in my opinion, they should have been made to pay more,” said Mr Mwaura.

Individuals with income stashed overseas got another year of extension to return the money into the country, with Mr Rotich proposing to exempt them from scrutiny on the sources of their wealth as provided for in the Proceeds of Crime and Anti-Money Laundering Act, or any other Act relating to reporting and investigation of financial transactions.

He, however, said those with proceeds from terrorism, poaching and drug trafficking will not be exempted from this scrutiny. The window for surrender of the assets, extended to June this year, will now stay open until June next year.


The Budget, which was centred on Jubilee’s four flagship agendas for the second term, saw Mr Rotich allocate some Sh460 billion to the key drivers of manufacturing, food and nutrition, universal health coverage, and affordable housing.

An ambitious Rotich told Parliament that if the Big Four agenda are implemented the economy will grow by at least seven per cent per year, resulting in more jobs and reduced poverty.

The affordable housing plan, which will see the government venture into building 500,000 affordable houses by 2022, will run on several incentives aimed at attracting investors for low-cost housing, including the servicing of land in major towns to prepare them for such initiatives.

Low-cost housing investors will also get their corporate taxes halved to 15 per cent if they put up least 100 units per year.

Consumer Federation of Kenya secretary-general Stephen Mutoro said Mr Rotich had leaned heavily low income earners.

“By raising the cost of food, there is no reason for consumers to welcome the Budget," said Mr Mutoro.