Brace yourselves for 3 tough years, Mudavadi warns Kenyans

Addressing over 2,000 accountants in Mombasa, he defended the Kenya Kwanza regime's economic strategies, including the proposed 3 per cent housing levy.

The accountants under the Institute of Certified Public Accounts of Kenya (ICPAK) are deliberating on the proposed Finance Bill 2023, among other issues.

"There is no room to lie to Kenyans. I agree the tax levels are painful, but where are the easy options? To run, you must have a budget, and we must raise revenue. It will take at least two to three years of rehabilitation for the economy to get out of the woods. Things went bad before Kenya Kwanza came in, and the situation is still bad," said Mudavadi.

"I confirm the levy is not a tax but a contributory investment. Three, I confirm that the contribution is a savings plan deduction with benefits accruing to the employee," he said.

He said the public debt ceiling is Sh10 trillion, which means the government has legroom to borrow only Sh600 billion and no more, hence it will result in delays in remittance to county governments and paying of salaries.

"The shilling has depreciated. How much can you borrow internally? It will hurt us for two to three years, but we shall get out of it," he assured.

He said the five per cent withholding tax is a proposal open to discussions and reviews.

"Let us remember the finance bills are proposals, and we are open to views and some adjustments can be made to navigate in these hard financial times. If you want us to cede some taxes, give an option, or the deficit will be unmanageable," said Mudavadi.

On the 16 per cent VAT on fuel, he said the government seeks to raise between Sh50 to Sh60 billion within months, and there is no available option. He said the fuel subsidy cost Sh16 billion to Sh20 billion per month depending on the exchange rate when the consignment was coming in.

ICPAK Chair George Mokua said weak corporate governance sits behind many of the failures in financial reporting, which have seen some of Kenya's largest companies experience financial difficulty.