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Why it will be difficult to finance Kenya's 2018/19 National Budget

14, Jun 2018

Life just got tougher for millions of poor households following sweeping changes in new taxation measures to be unveiled by National Treasury Cabinet Secretary Henry Rotich this afternoon. He will impose Value Added Tax on essential commodities such as milk and bread that have been previously exempt, raising their prices by about a fifth in his plans to raise nearly Sh1.8 trillion. Nearly half of that amount will go into paying debts to lenders including China – which has funded tens of mega projects including the Standard Gauge Railway line. Such measures come to effect in just two weeks at midnight of June 30, hitting where it hurts the most, right in your pockets. For households that are already struggling, the impact of the imminent price hikes is untold. A packet of milk currently retailing Sh50, for instance, would rise by Sh10. A two-kilo packet of maize flour will edge towards Sh130. So brace yourself. Deliberate efforts to cushion the poor from the high cost of living prompted the Government to exempt the essential commodities since 2013 when Rotich first crafted the budget. Philip Muema, a tax expert, told The Standard yesterday that the Government has full determination to collect as much taxes as possible. Among the proposals under consideration and likely to be passed, considering the absolute majority support that the Government has in Parliament, include application of VAT and presumptive taxes.