- The Treasury must strike a balance between funding President Kenyatta’s capital-intensive sending projects and raising more money from taxpayers.
- The Treasury aims to raise around 2.04 trillion shillings in total revenue from an estimate of 1.83 trillion shillings for the current year ending this month.
Treasury Cabinet Secretary Ukur Yatani will announce tougher tax compliance measures and revised laws to raise funds to partially fund the 3.6 trillion shillings budget for the fiscal year starting in July.
Yatani will describe the strategy of raising an additional 210 billion shillings in total revenue to fund President Uhuru Kenyatta’s latest annual budget when he presents the country’s spending plan to the National Assembly this afternoon.
Fiscal year 2021-22 budget is expected to cement the legacy of Mr. Kenyatta’s 10-year tenure in a difficult economic environment clouded by depressed corporate and household profits amid uncertainties stemming from the Covid-19 pandemic .
Mr Yatani walks a tightrope as he seeks a delicate balance between funding Mr Kenyatta’s capital-intensive heritage projects and imposing more taxes on individuals and businesses despite the disruption intermittent economic activity dictated by the pandemic.
The Treasury aims to raise about 2.04 trillion shillings in total revenue from an estimate of 1.83 trillion shillings for the current year ending this month, according to the report of the budget and credits committee.
Ordinary revenue streams for the treasury – including taxes and non-tax flows such as court fines, user fees for government services, rents, and confiscations – are expected to reach 1.78 trillion shillings, or 87, 10 percent of income projections.
This is Sh202 billion more than Sh1.57 trillion in the current fiscal year, with revenue for 10 months through April amounting to Sh1.27 trillion. Higher revenue forecasts will put more pressure on the Kenya Revenue Authority (KRA) which has historically struggled to meet targets in a largely informal economy with low tax compliance.
Tax revenues from revenue streams, value added tax (VAT), excise and import duties are expected to increase by Sh 102 billion, Sh 78 billion, 32 billion and 23 billion, respectively, to reach Sh 835 billion, 473 billion Sh, 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 increasing tax controls aimed at mitigating revenue leakage through concealment and under-reporting of income. businesses and households to increase their income.
The Treasury committed, in the fiscal policy statement (DBP) 2021 – which forms the basis of public spending – to increasing the allocation of resources to improve decisions through an alternative dispute settlement mechanism and a conclusion expeditiousness of cases before the Tax Appeals Tribunal.
The KRA is expected to continue raiding tax evasion with its ability to feed the financial transactions of individuals and third party businesses such as banks and utility providers into its data warehouse and business intelligence (DWBI) platforms at the Times Tower headquarters.
Earlier in the year, the IRS successfully put pressure on the National Assembly’s Finance and National Planning Committee to allocate additional funds to recruit around 2,000 officers to bolster its prosecution of tax fraud for the wealthy. It is not clear whether or not the Treasury has allocated the requested funds.
KRA Commissioner General Githii Mburu further said the tax authorities would seek to increase public participation in reporting tax fraud and of its staff who encourage tax evasion and corruption by deploying an anonymous reporting system. online, a platform he has tried to install since 2013.
The tax authorities have relied on visits or emails and phone calls made through KRA’s complaints and information center for advice – a technique that has had limited success in part because it obliges informants to submit personal information.
To further widen the tax bracket, the KRA extended a partial tax amnesty to businesses and individuals who have five-year tax arrears to pay without incurring accrued interest and penalties.
The budget bill has largely focused on streamlining tax changes introduced during this fiscal year, such as the digital services tax, which brought in 252 million shillings in February and March 2021 and is expected to bring in 1, 5 billion shillings in the next fiscal year.
Tax experts said the tax proposals, including the introduction of VAT on basic products such as bread and some medicines, are expected to bring in at most 40 billion shillings.
“I anticipate an amendment to the tax laws in FY 2021/22 because the finance bill will not yield much,” said Francis Kamau, senior tax partner at EY East Africa, audit and advice. The amendment, he added, should focus on under-taxed areas such as real estate that the Treasury could consider, increasing the capital gains tax on land transactions and removing exemptions under the Stamp Duties Act.