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Yatani walks a tightrope in Uhuru Sh3.6trn’s inherited budget

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Yatani walks a tightrope in Uhuru Sh3.6trn’s inherited budget

Economy

Yatani walks a tightrope in Uhuru Sh3.6trn’s inherited budget


Treasury Cabinet Secretary Ukur Yatani at his office in Nairobi on June 9, 2021, a day before reading Budget 2021/22. PHOTO | JOAN PERERUAN | NMG

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  • The Treasury must balance funding for President Kenyatta’s capital-intensive layoff projects and get more cash from taxpayers.
  • The Treasury aims to raise approximately Sh2.04 trillion in total revenue compared to estimates of Sh1.83 trillion for the current year ending this month.

Treasury Cabinet Secretary Ukur Yatani will announce stringent tax compliance measures and law revisions to raise cash to partially fund the $ 3.6 trillion budget for the financial year that begins in July.

Yatani will outline the strategy of raising an additional Sh210 billion in total revenue to fund President Uhuru Kenyatta’s final annual budget when he presents the country’s spending plan to the National Assembly this afternoon.

The 2021-22 financial year budget is expected to cement Kenyatta’s 10-year legacy in a tough economic environment marred by depressed corporate and family profits amid uncertainties stemming from the Covid-19 pandemic.

Yatani walks a tightrope as he seeks a delicate balance between financing Kenyatta’s capital-intensive legacy projects and exacting more taxes from individuals and businesses despite intermittent disruptions to economic activity dictated by the pandemic.

The Treasury is aiming to raise around Sh2.04 trillion in total revenue compared to estimates of Sh1.83 trillion for the current year ending this month, according to the Budget and Appropriations Committee report.

Ordinary revenue streams to the Treasury, comprising taxes and non-tax streams, such as court fines, charges for the use of government services, rent and forfeiture, are projected to reach 1.78 trillion shillings, or 87.10 percent of revenue projections.

This is Sh202 billion more compared to Sh1.57 billion in the current fiscal year, with 10-month revenue through April amounting to Sh1.27 billion. A higher revenue forecast will put more pressure on the Kenya Revenue Authority (KRA) which has consistently struggled to meet targets in a largely informal economy where tax compliance is low.

Tax revenue from income, value added tax (VAT), excise duties, and import duty streams is forecast to increase by 102 billion shillings, 78 billion shillings, 32 billion shillings and 23 billion. billion shillings, respectively, to 835 billion, 473 billion, 241 billion, and Sh119 billion in the next financial year.

With little room for new tax measures as outlined in the 2021 Finance Bill, Yatani is betting heavily on increased tax audits aimed at mitigating revenue leaks through concealment and underreporting of earnings by part of businesses and households to increase income.

The Treasury, in the Budget Policy Statement (BPS) 2021, which constitutes the basis of public spending, committed to increasing the allocation of resources to improve determinations through an alternative dispute resolution mechanism and the accelerated conclusion of the cases before the Court of Tax Appeal.

Tax collection

The KRA is expected to continue to attack tax traps through its ability to feed financial transactions from third-party individuals and businesses, such as banks and utility providers, on its data storage and business intelligence (DWBI) platforms at headquarters. from Times Tower.

The tax collector earlier in the year successfully lobbied the National Assembly’s National Planning and Finance Committee for additional funds to recruit about 2,000 officials to bolster its quest for high-net-worth tax traps. It is not clear whether the Treasury allocated the requested funds or not.

KRA Commissioner General Githii Mburu has further said that the tax collector will seek to increase public participation in reporting tax cheating and its staff that incites tax evasion and bribery by deploying a reporting system. anonymous web-based, a platform you’ve been trying to install since 2013.

The tax collector has been relying on walk-ins or emails and phone calls made through the KRA Complaint and Information Center for suggestions, a technique that has met with limited success in part because it requires informants send personal data.

To further expand the tax bracket, the KRA has extended a partial tax amnesty to businesses and individuals who have tax arrears dating back five years to pay without incurring accrued interest and penalties.

The Finance Bill has largely focused on streamlining the tax amendments introduced this fiscal year, such as the digital service tax, which generated Sh252 million in February and March 2021 and is forecast to raise Sh1.5 billion on next fiscal year.

Tax experts said that the tax proposals, including the introduction of VAT on basic goods such as bread and some medicines, would likely yield a yield of 40 billion shillings at most.

“I anticipate an amendment to the tax laws within the 2021/22 fiscal year because the Finance Bill will not yield much,” said Francis Kamau, senior tax partner at EY East Africa consulting and auditing. The amendment, he added, should focus on under-taxed areas, such as real estate, where the Treasury could look, increasing the capital gains tax on land transactions and eliminating exemptions under the Stamp Tax Act.

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