Hidden pain in financing Jubilee’s bag of goodies


Kenya: Prepare to pay more for food, fuel, cosmetics, toothpaste, and beer and all imported goods to enjoy the bag of goodies spelt out in President Kenyatta’s government.

As predicted in The Standard yesterday, the real pain of this year’s budget is in the Value Added Tax (VAT) Bill that is coming to Parliament next week.

In what is set to make life painfully expensive for consumers, the Government has proposed to retable the controversial VAT Bill that will see Kenyans spend at least Sh16 more for every Sh100 spent on maize flour, milk, bread, fertilizer, computers, books, wheat flour, livestock feed, pesticides and books.

To lift 10 million people out of poverty and to support a new devolved system of government that created 47 new local government units, Treasury also plans to slap a 16 per cent tax on sanitary towels, newspapers, insecticides, locally assembled water pumps and gin cotton.

Rotich also stopped the party for drinkers of cheaper alcohol such as Senator Keg in his budget that has a Sh356.9 billion deficit.

Brewers will now be required to pay half of the tax on beer made for the bottom end of the market. Since its introduction in 2004, Keg, produced by East African Breweries Limited was tax-exempt as part of Government efforts to fight the mushrooming of illicit and unhealthy liquor dens.

Since then it has come to control slightly over 40 per cent of the regulated market for low-end beer and is hugely popular.

Hit drinkers

Taxing it will therefore hit millions of drinkers who cannot pay for the more expensive beer brands.

To support local farming, only beer brewed from millet, sorghum and cassava will enjoy tax remissions.

Gamblers who win cash prizes from gaming and betting companies have also not been spared. They will now pay tax for their ‘luck.’

Local manufacturers have emerged as the biggest winners in the Sh1.6 trillion spending plan that will see the construction of a Sh22 billion standard gauge railway line from Mombasa to Kisumu.

But this railway line will come at a cost given that Kenyans will pay a 1.5 per cent extra tax on all imported goods in the name of a Railway Development Levy.

This is clearly well targeted to shore up revenue collections because Kenya imports almost everything from food to fuel. The new levy is expected to mobilise Sh15 billion for the three-year project in a bid to reduce the cost of freight.

This promises to push up food inflation in the short term despite a pledge by President Uhuru’s government to make the cost of living affordable. 

“I have proposed tax measures aimed at facilitating development of infrastructure facilities such as railway and energy in order to reduce the cost of transport and energy and make our economy competitive,” Rotich said yesterday in his budget statement presented to Parliament.

Rotich has also exempted duty on imported items used to facilitate railway operations in order to support the expansion of the railway network in the region.

The Government will spend Sh3.1 billion and another Sh522 million for recruitment of 30 community nurses and 10 community health workers, respectively, for each constituency.

Rotich set aside Sh97.9 billion for continued road expansion, upgrading and rehabilitation throughout the country. Another Sh78.5 billion will be used to scale up investment in reliable and affordable energy, Sh12.5 billion going to geothermal development and Sh23.8 billion to enhance power transmission.

Lamu Port got Sh3.7 billion for construction of the first three berths and associated infrastructure under the LAPPSET project.

The security docket got a shot in the arm as Treasury set aside Sh4 billion for purchase of security equipment, Sh4.5 billion for enhancing security operations and another.

Another Sh1.5 billion was allocated to boost crime research and investigation to understand crime dynamics and enable the law enforcers to come up with appropriate strategies for crime prevention.

Rotich plans to spend Sh3 billion to lease 1,200 motor vehicles annually for the police force in a bid to make police patrol visible everywhere to respond to any reported crime much more efficiently.

The police also received Sh1.2 billion for a rapid development of 2,000 housing units through the National Housing Corporation.

Mr Kenyatta’s government will spend Sh8 billion to implement the on-going irrigation projects spread throughout the country.

Farmers now have Sh2 billion set aside for Agri-Business Fund to de-risk and leverage commercial bank lending to smallholder and commercial farmers throughout the country.

“We plan to scale this Fund to Sh20 billion by the 4th year to expand its access to as many Kenyans who venture in farming as a business,” Mr Rotich said.

Some Sh3.6 billion will be spent on the first phase of the 1 million acre irrigation and food security project in Galana covering the detailed study, developing an implementation framework and business plan.

The Government also plans to enact a Biashara Kenya Bill now under formulation that aims to provide a one-stop shop solution to all small and medium size enterprises covering the entire business chain.

These will include business development, product standardisation and branding, access to credit, business incubation services, and market access.

In its spending plan, the Government has set aside Sh273.7 billion for Education including free primary and secondary education and school feeding programme.

Under this, Sh10.3 billion will go towards free Primary Education and Sh2.6 billion for school feeding programme, Sh20.9 billion for free Day Secondary Education and another Sh1.17 billion for Secondary Schools Bursary.

“I have also set aside Sh800 million to upgrade the National Schools and another Sh4.9 billion has been allocated for Higher Education Loan Board and Sh826 million for Youth Polytechnics,” Mr Rotich said.

The Government plans to spend 53.2 billion for deployment of 1.35 million laptops to class one pupils in the next three years. This will also see the development of digital content, and building capacity of teachers and rolling out computer laboratory for class 4 to class 8 in all schools throughout the country.

Sh17.4 billion

It will spend Sh17.4 billion in the first phase that commences in January next year.

Maternal health, Uhuru’s latest fad in charity, received Sh3.8 billion. The government also plans to spend 1.2 billion for construction of 1,500 prefabricated housing units for health care officials and another Sh200 million for construction of 200 prefabricated health care facilities in slums.

In a push to encourage the usage of renewable energy as an alternative source of energy, Mr Rotich proposed an exemption of import duty on plastic bag biogas digesters.

To further cushion local manufacturers, the government slapped import duty on welding electrodes from 10 per cent to 25 per cent, millstones and grindstones from 0 per cent to 25 per cent and plastic tubes for packing of toothpaste, cosmetics and similar products from 10 per cent to 25 per cent.

“I expect this measure to cushion the local manufacturers from cheap imports,” Mr Rotich said.

Employers also got a major boost on insurance premiums paid on behalf of employees for Group Life and Group Personal Accident policy covers after government exempted premiums for such covers where they do not confer a benefit to the employees.

Persons with disabilities will also continue being exempted from paying tax for another two years.

 In a move aimed at making the rich pay more in funding the budget, the government has initiated a review of the Capital gains tax.

“This will allow wealthier members of our society to also make a token contribution toward our national development agenda,” Mr Rotich said.