Cut pointless costs, economist tells govt

June 12, 2013
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Treasury Secretary Henry Rotich is expected to read the budget speech in Parliament on Thursday afternoon.
Treasury Secretary Henry Rotich is expected to read the budget speech in Parliament on Thursday afternoon.

, NAIROBI, Kenya, Jun 12 – The government may face tough times in funding the various social projects like the free maternal healthcare unless it drastically cuts back on unnecessary spending, an economist has cautioned.

The Chief Executive Officer of the Institute of Economic Affairs (IEA) Kwame Owino says spending cuts would be more practical than automation of tax management systems at the Kenya Revenue Authority (KRA) or tax increase on income.

He says government should first deal with billions of shillings being wasted through unnecessary budgets and corruption.

“Even at the IEA, we accept that indeed that social protection is good. Like free education, both primary and secondary, we now have the free maternal health care covered and so on. All these things are good. But where is the money going to come from?” he challenged.

He said there was need for the government to also reduce tax incentives adding that this was also robbing the economy.

“Over Sh70 billion is lost almost every year through unnecessary incentives. If you calculate this in like five years, it’s a lot of money. I think what we need is proper management plan to ensure that this noble course is maintained in the long term,” Kwame said.

“Several countries have stopped giving tax holidays and have replaced them with uniform tax regime of low tax rates and highly selective and limited tax incentives. Tax holidays lead to “tax shopping” with companies exiting as soon as the holiday expires,” he cautioned.

He was speaking at a budget analysis forum in Nairobi ahead of the 2013/2014 budget reading in Parliament on Thursday.

Cabinet Secretary for National Treasury Henry Rotich is expected to tell Kenyans how the government intends to raise money to fund the Sh1.64 trillion budget.

One of the tax measures suggested by the institution for Rotich include making pension savings mandatory for all income earning persons in the country and permitting individuals to contribute any pension amount above the National Social Security Fund (NSSF) pension minimum to a pension scheme of their choice.

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