Budget a catch-22 case for Treasury
By Editorial.Team, June 13, 2023On Thursday, Treasury Cabinet Secretary Njuguna Ndung’u will read perhaps the most scrutinised budget statement in Kenya’s recent history as the opposition, civil society, trade associations and lobby groups fired from all cylinders to be heard.
The outcome of this critical budget statement is expected to have far-reaching consequences for the country’s financial stability.
With the House sharply divided over the Finance Bill, 2023, this week will be the culmination of a significant battle as Kenyans and businesses face anxiety over how the new taxes will impact purchasing power.
Discussions to allow the Bill to pass with amendments is a move in the right direction, so as to gain parliamentary approval, however, the import of this is that the government will face significant challenges in raising the extra Sh371 billion in ordinary revenue needed to fund the economy.
Among the most controversial sections of the Bill include the National Housing Fund levy on all Kenyan employees. The other major development is the 16 per cent VAT levy on fuel that could further lift fuel prices, raising the cost of living.
Another proposal that has been opposed is the tax on insurance claims which experts say is double taxation. The list also includes a 15 per cent withholding tax for social media influencers and content producers, which is likely to deter youth from exploring content creation as a career path, and a turnover tax on businesses with Sh1,370 in daily sales, which will begin paying Sh15,000 in tax annually.
While a five per cent excise duty on human hair, wigs, false beards, eyebrows and eyelashes, as well as artificial nails, will result in lower sales and profit margins in the beauty industry, a 20 per cent excise duty on loans from digital lenders will make mobile loans expensive by increasing fees charged on microloans.
These come when the Central Bank of Kenya has warned that it will be hard for the government to raise money in the domestic market next year.
What this portends is that as Kenyans await the budget statement, this is a catch-22 situation for Treasury mandarins, which sets the stage for interesting times ahead.