Households, tea farmers reap big in Ruto’s Sh3.5 trillion budget
National Treasury and Economic Planning Cabinet Secretary Njuguna Ndung’u.
Households, tea farmers and fishermen are set to reap big in the first budget under President William Ruto’s administration, as the National Treasury lines up a number of incentives to shield them from prevailing high costs.
The incentives are part of the National Treasury’s Sh3.5 trillion budget for the 2023/24 financial year, which also factors a total Sh267.7 billion funding for nine value chains including dairy, rice, construction and minerals that mainstream the bottom-up transformation agenda.
Imported liquefied petroleum gas (LPG) will be exempt from VAT, a move that will significantly lower the cost of cooking gas for millions of households.
Currently, 6kg cylinders are refilled for between Sh1,250 and Sh1,440. The 13kg cylinders are refilled for between Sh2,700 and Sh3,100.
The proposed Finance Bill amendments were approved by the Cabinet yesterday morning after a special meeting chaired by President William Ruto, to finalise plans for his administration’s inaugural budget.
The proposed amendments have been forwarded to Parliament for approval.
President Ruto last month pledged to slash prices by more than half at the start of the 2023/24 financial year through various tax incentives.
Tea purchased from local factories and the auction centre in Mombasa will also be exempt from VAT. The National Treasury will also attempt to extend such incentives to companies producing packaging materials in the hope that the move further lowers the cost of locally produced tea.
And in a move to grow the local fishing industry, excise duty will be charged on imported fish. Businesses dealing in imported furniture will suffer a similar fate as the government looks to grow employment opportunities in the informal sector.
The move comes barely five months after Kenya struck a deal that will see the Republic of Hungary complete a Sh2.5 billion project to increase fingerling production, put up a Nile Perch multiplication centre and a fishing school on the shores of Lake Victoria.
The coastal region’s fishing potential has also remained largely untapped despite huge variety in edible marine life species. Most of the fishing in Kenya’s coast is small-scale.
Pharmaceutical companies will also join the list of beneficiaries in the proposed tax regime, as tax incentives will be extended to firms that produce vaccines and other bio-pharmaceutical products.
America’s Moderna Inc could be the first major beneficiary as it last month signed a deal with Kenya to set up a $500 million (Sh67.9 billion) vaccine facility in Nairobi. The state-of-the-art facility is expected to produce up to 500 million vaccine doses each year.
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Treasury CS Prof Njuguna Ndung’u is expected to present the proposed amendments to the Finance Bill in his budget speech for the 2023/24 financial year.
In the next financial year, the government will pump Sh267.7 billion in nine sectors expected to boost various value chains.
The clothing, edible oil, dairy products, leather, rice, tea, fisheries, minerals and construction sectors will get a slice of the Sh267.7 billion cake. The nine sectors are expected to create jobs and lower the cost of living, while widening the tax bracket in line with President Ruto’s Bottom-Up campaign pledge.
The National Treasury expects to collect Sh2.8 trillion in taxes in the 2023/24 financial year, in what would be an increase from the Sh2.5 trillion netted in the financial year ending June, 2023.
In its first full financial year in charge, the Kenya Kwanza government will face a Sh663.5 billion deficit in the budget, an equivalent of 5.7 per cent of the country’s gross domestic product.
The government had a Sh1.12 trillion budget deficit in the 2022/23 financial year, an equivalent of 6.2 per cent of Kenya’s gross domestic product. The reduction in budget deficit has been attributed to reduced borrowing and cost-cutting measures.
The Treasury projects that in the last financial year of President Ruto’s first term, the Kenya Revenue Authority will net Sh4.1 trillion in taxes.
Part of the Treasury’s plan to increase tax collection will see a one-year amnesty on penalties and outstanding taxes. The move is aimed at encouraging individuals and companies to pay taxes and file returns.
Companies due for VAT refunds will be free to offset other tax liabilities instead of cashing in.
Currently, the government is owed Sh1.5 trillion in outstanding taxes and penalties.
Prof Ndung’u will at the budget presentation propose to give the KRA Commissioner-General powers to adjust specific excise duty rates to assist companies in the affected industries make projections and make adequate arrangements to pay the taxman his dues.
In the same budget, county governments are expected to receive their highest ever annual allocations, at Sh429.7 billion.
The government will release Sh385.4 billion from the national cake, with an additional Sh43.7 billion flowing in from conditional grants and other shareable revenue.
Counties will receive Sh33.2 billion from other countries in conditional grants. Additional revenue from the national government to counties will be Sh5.9 billion for the medical equipment services programme, Sh4.7 billion for county industrial parks and Sh454 million for county headquarters.
And for the first time in several years, the Judiciary’s budget has been bumped up. The National Treasury plans to allocate Sh22.9 billion to the Judiciary, an increase of Sh4.1 billion.
Budget cuts have often been a source of conflict between the Executive and Judiciary in the past decade, especially the latter’s infrastructure deal with the World Bank worth billions lapsed just before the Covid-19 pandemic struck.
