The 'zero sum game' of the 2016/17 budget estimates

The 2016 budgetary estimates depict a double sword feature in so many respects. The tax man concedes as much as he takes. Liquid Petroleum Gas shall now be VAT exempt, import duty for energy efficient stoves shall be lowered from 25% to 10%. On the other hand excise duty on kerosene was re-introduced to curb adulteration of fuel in the country, measures that the government says shall help in reducing emissions and uplifting those in the low income carder but what of the increase in the fuel levy from Sh12 to Sh18 per liter that shall push up the transport cost and cost of manufactured goods?

In order to boost the tourism sector that has suffered a decline in the recent past, a VAT cut on national park entry fees as well as exemption on commissions earned by tour operators was proposed. In a counter balance air passenger service charges for external travel rose from $40 to $50 and for internal travel from 500 to 600 Kenya shillings. The revenue will be used exclusively for the promotion of tourism. Another ‘zero sum game’.

Perhaps yielding to calls by experts for change in the income tax framework, the Government agreed in to increasing the tax bands and relief by 10% and a waiver of taxes on bonuses, retirement benefits and overtime. A shift from direct to indirect taxation. Another case of give and take later.

To the users of cosmetics and beauty products the budget looks no pretty given the introduction of 10% excise duty, a move the taxman says is aimed at harmonizing the excise tax regime in the EAC countries. This means that these products shall be more expensive. This in my opinion is an endeavor to grow and redistribute the excise duty burden on luxurious products, apparently a departure from the past trends where by alcohol and beverage products were taxed in a row hence hitting a prohibitive high.

Beyond zero features

Removal of all levies charged by National Environmental Management Authority and National Construction Authority in order to reduce the cost of doing business and boost construction industry was a renewal of the government’s commitment to improving the business environment. It’s also my view that the issues around administration of the licensing process in seeking approvals and extortions should be addressed as well.

It is during this financial year that our banking sector was caught up in a confidence crisis therefore, measures to address the salient issues behind the collapse of those banking institutions were well anticipated. In this regard, the government did have penalties for violating the regulator’s prudential guidelines by the banks now capped at 20million up from 5million as a deterrence measure. Of urgency is also the need for more tightening of the regulatory and control measures in additional to a review of the governance subject in our financial institutions.

In the spirit of addressing certainty which is a fundamental taxation principle, the government did give more clarity to an incentive extended to organizations in the previous financial year in regards to encouraging uptake of graduates for training. The Cs did pronounce that 150% of the cost of training ten or more graduates shall be offset against the organization’s tax obligation as a tax benefit. This incentive is in furtherance of the government’s objective in helping graduates like me in addressing the knowledge gaps between class work and the job market.  

This budget if administered in accordance with the provisions of article 201; public finance management act and the related legislation is a step in the right direction though, it’s no way a departure from previous budgets we have had. A relook at our procurement procedure and disbursement process is timely as we seek to scale up the rate of absorption of each vote. Unless we regularize this and address capacity issues then our budget shall continue to experience diminishing to near zero impact on society over time.