Inside Rotich's Sh3.02 trillion budget

National Treasury CS Henry Rotich presenting the budget at Parliament. [Boniface Okendo, Standard]

NAIROBI, KENYA:  Treasury  Secretary Henry Rotich has presented the 2019/20 budget in Parliament featuring new tax measures that pump extra Sh37 billion into the Exchequer.

On Pending Bills

The Government reviewed pending bills as ordered by President Uhuru Kenyatta and prioritised payment of Sh10.9 billion of the verified pending bills which will be paid before the end of this month.

"This should eliminate most pending bills owed to the youth, women, and persons living with disabilities under the Access to Government Procurement Opportunity. The clearance of this backlog should improve liquidity to our suppliers and contractors and thereby boost our economy," said Rotich.

Micro, Small and Medium Enterprises

CS Rotich consolidated the three funds into one to be known as Biashara Kenya Fund to increase efficiency and eliminate overlaps.

The Fund will give special priority to businesses owned by the youth, women, and people living with disabilities. He said, the Regulations establishing the new Fund had been published after being subjected to stakeholder consultations and would be submitted  to  parliament

Expenditure

He said the Government would use more efficient cost-cutting approaches, including the use of electronic cards for all public officers travelling within and outside the country. The cards will be pre-loaded with subsistence allowance to be expended by Officers travelling on official duty on eligible expenditures only.

In order to contain the ballooning wage bill, Rotich proposed to limit strictly the extension of service employment for the significant number of civil servants who are retiring after the age of 60 years.

In addition, the government will restrict new recruitment to key technical staff, security personnel, teachers and health workers. 

He told the House that the government will fast-track migration away from the current Integrated Payroll and Personnel Database System (IPPD) to IFMIS Human Resource Module to improve payroll management.

To increase tax collection, he said administrative measures to enhance revenue collection and seal revenue loopholes a number of initiatives were underway, including, sustaining the fight against illicit and counterfeit trade that was launched last year.

KRA, he added, would continue to strengthen and upgrade  ICT systems, including the full rollout of the Integrated Customs Management System which has been delayed for too long  besides information sharing through Memorandum of Understanding (MoUs) with other jurisdictions to support the fight against cross-border tax evasion;

Economic growth

He said the economy continued to be resilient in the midst of significant global and domestic elements.

"In 2018 our economy grew by 6.3 per cent, up from 4.9 in the previous year, " he said adding "the growth is the highest to have been recorded for the past 8 years and well above the sub-Saharan Africa regional average growth of 3 per cent and the global average of 3.6 per cent.”

On the budgetary deficit, Mr Rotich said  it represented 5.6 per cent   of the GDP which a decline from 6.8 per cent in this financial year and 7.4 per cent in the last financial year.

The deficit, he said would be financed by net external financing of Sh324 billion, and net domestic financing of Sh283.5 billion.

Counties

The devolved units were allocated Sh371.6 billion, of which, Sh 310 billion is the equitable share and Sh 61.6 billion conditional transfers, including Sh38.7 billion from  Kenya's development partners.

The Big Four Agenda (housing, manufacturing, Health, and security was given Sh450.9 billion.

Universal Health Coverage was allocated Sh 47.8 billion while affordable housing got Sh10.5 billion to cater for social housing and construction of affordable housing units, including housing Units for the Police and Kenya Prison.

Included also was Sh2.3 billion for the Public Servants Housing Mortgage Scheme and Sh5.0 billion for the National Housing Development Fund, as contributions by Government for its employees.

Manufacturing

The sector was allocated a total of Sh 1.1 billion for the development of textile and leather industrial park, Naivasha Industrial Park and Cotton Development subsidy.

The government also allocated Sh1.7 billion to support the growth of SMEs in the manufacturing sector; Sh 0.4 billion to Constituency Industrial Development Centers; and Sh1.0 billion to modernise facilities in Kenya Industrial Research and Development Institute (KIRDI).

Security and border protection was allocated Sh 326.5 billion for security agencies which include: Sh 121.6 billion for Defence, Sh 37.7 billion for National Intelligence Service; Sh 26.9 billion for Prisons Department; Sh 140.5 billion for State Department of Interior. The allocation to the State Department of Interior includes Sh 22.8 billion for House Allowance for the Police and Prisons, and Sh 6.9 billion for Police and Prison Officers Medical Scheme.

Education

Sh 55.4 billion  was allocated for Free Day Secondary Education Programme and Sh 13.4 billion for Free Primary Education Programme.

To increase the teacher to student ratio,  the government provided Sh 3.2 billion for the recruitment of additional teachers.

Other allocations included Sh 1.5 billion for primary and secondary school infrastructure, Sh 10.3 billion for tuition and tools support to vocational training, Sh 6.8 billion for the construction and equipping of technical institutions, Sh 4.0 billion for examinations fee waiver for all class eight and form four candidates, and Sh 4.0 billion for NHIF Insurance for secondary school students.

Sh 97.7 billion was set aside to support University Education; and Sh12.6 billion to the Higher Education Loans Board.

Taxation Proposals

According to Henry Rotich, the tax policy measures in 2019/20 budget are expected to generate an additional Sh 37.0 billion, in tax revenue to the Exchequer.

The CS made limited changes to the Income Tax Act to enhance equity and fairness but increased the rate of Capital Gains Tax from 5 per cent to 12.5 per cent.

He proposed to the House a reduction VAT Withholding rate from 6 per cent to 2 per cent

On excise duty, the CS proposed to introduce excise duty on betting activities at the rate of ten percent of the amount staked.

He also proposed to reduce the excise duty on motor vehicles that are fully powered by electricity to 10 per cent.

Mr Rotich increased the rates of excise duty on cigarettes, wines and spirit by 15 per cent. “A 750ml bottle of wine will have an excise duty of Sh136 which is Sh18 more from the current rate; the duty of a bottle of whisky will go up by Sh24 to Sh 182 for a 750ml bottle. The excise duty on a packet of 20 cigarettes will henceforth increase by Sh8 to Sh61 per packet,” said the CS