Reduce debt, tax experts warn govt

June 11, 2012
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Finance Minister Njeru Githae/FILE

, NAIROBI,Kenya,Jun 11 – Tax experts have challenged the Treasury to device ways of collecting higher revenue and stop the country’s reliance on debt.

Deloitte East Africa cautioned that weak tax measures would see government debt which now stands at 51 percent of the Growth Domestic product (GDP) continue to grow.

The Treasury plans to spend Sh1.4 trillion in the 2012/2013 financial year, and Finance Minister Njeru Githae is scheduled to announce on Thursday how the government intends to raise that money.

Deloitte Tax Partner Nikhil Hira also stressed the need to curb the government’s recurrent expenditure and instead channel most of the monies to development which, he says, has for a long time received the smallest share.

“The problem I have with increasing this spending is that we haven’t really worked on how we are going to finance it. Even in the current estimates, 50 to sixty percent is going to be financed by Kenyans, the rest will come from borrowing or aid,” said Hira.

The government has also been urged to come up with a new Income Tax law as the current one is outdated after being in place for the last four decades.

Hira also challenged the Treasury to widen its tax net in order to collect from millions of Kenyans employed in the informal sector.

“We should start with a blank piece of paper. Because the danger of taking what we have and try to work around it, we will still end up with ambiguous and unclear legislation. We know what the basic principles are and we have to rewrite it completely,” added Hira.

On his part Deloitte CEO Sammy Onyango called for more allocation to the agriculture, health and security sectors in the coming budget.

He argued that the education sector has been receiving the lion’s share of budgetary allocations at the expense of other crucial sectors.

“African governments must allocate at least 10 percent of their national budget to agriculture; ours is five percent. Infact the national average for most of the developed countries is between 20 to thirty percent. So why is Africa not giving agriculture the priority it deserves?” posed Onyango quoting the Maputo Declaration on Agriculture and Food Security.

He has also called for the removal of blanket tax incentives which he says are “robbing” the economy of huge amounts of money.

They hope all these will be considered in the budget statement expected to be read by the Finance Minister on Thursday.

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