The 2020/21 budget winners and losers
Treasury Cabinet Secretary Ukur Yatani’s maiden budget statement delivered a mixed bag of fortune for Kenyans in a quest to strike a balance in net spending.
Premised on cushioning Kenyans against the Covid-19 shocks and pursuing medium term goals, the Ksh.2.79 trillion budget has drawn out clear winners and losers.
Both the allocations towards a post Covid-19 economic recovery plan and the big four enablers and drivers have for instance been raised slightly higher to Ksh.56.6 billion and Ksh.128.3 billion from Ksh.53.7 billion and Ksh.127.3 billion respectively.
Meanwhile, new tax measures as previously proposed in the 2020, Finance Bill are projected to raise up to Ksh.38.9 billion to cut the fiscal deficit to 7.5 percent of GDP from the projected wider deficit of 8.3 percent at the end of June.
The manufacturing sector has emerged as one of the clearest winners from Thursday’s statement with the National Treasury moving to further stimulate local industry.
Local iron and steel producers will for instance remain sheltered as the Treasury maintains the rate of import duty for the imported goods at 35 percent for another year.
Further, the import duty rate on the importing of electrical parts and accessories has been lifted to 35 percent from 25 percent to protect local assemblers as the duties on the import of mobile phone parts is lifted.
More over further ammendments made through the East African Community Duty Free Remission scheme sees a waiver on duty on the import of inputs used in the manufacture of personal protective equipment (PPEs).
Other winners in the budget include healthcare as the National Treasury exempts medical services including ambulance services, dental procedures and nursing from Value Added Tax (VAT) in the Planning Ministry attempts to lower costs to Kenyans.
Further, landlords grossing lower rental income have a reason to smile as the 2020, Finance Bill proposes to lift the threshold of income tax from an annual Ksh.10 million to 15 million.
Non-tax compliant individuals are also in on the winnings as ammendments to the tax procedures Act seek to give a three year moratorium to allow compliance on previous omissions in declaration of tax and incomes.
From the hand that giveth, the same hand seeks to take away relief by way of higher taxes to Mwananchi as Treasury finds itself pinned by greater revenue demands.
In its tax proposals that chose to raise Ksh.38.9 billion in new exchequer income, the average Kenyan is expected to take a hit as Treasury pushes once more for a lift on exemptions which will make common user goods such as LPG gas and cleaning cooking stoves expensive.
Consequently, Treasury is clapping back on the relief arising from recent ammendments made through the Tax Laws (Ammendment) Act which included a reduction to both income taxes, VAT and resident income/corporation tax.
This is as the exchequer seeks to offset losses tabulated at Ksh.172 billion from prior tax laws ammendments.
Monthly pension payments under the National Social Security Fund (NSSF) are proposed to incur tax as Treasury seeks to take out relief on home ownership saving plans (HOSPs).
Struggling businesses are expected to come under exerted pressure as the National Treasury proposes a minimum tax calculated at one percent of gross turnovers to widen the tax net and trim down on tax avoidance perpetrated through loss declarations.
Meanwhile, the digital market place seems to be Treasury’s new muse as the ministry proposes a new digital services tax (DST) calculated at 1.5 percent of gross sales.
Alcohol manufacturers and consumers are expected to feature in this year’s ‘sin tax’ as Treasury seeks to increase the excise duty to incorporate more beers and spirits by reviewing the coverage of the tax by strength of alcohol content.