Expert questions devolved budget

June 11, 2009

, NAIROBI, Kenya, Jun 11 – Finance Minister Uhuru Kenyatta’s budget proposals are largely geared towards stimulating growth from the grassroots. One clear indication is the Sh12 billion allocated to the Constituency Development Fund.

Each Constituency will also benefit from 22 percent of the Roads Levy to be used in the maintenance of rural roads. 

But Tabitha Munyagia a Legal and Tax expert at Ernst & Young has expressed concern saying that going by past experience there are no controls and checks in place to account for these monies.

“We’ve seen cases where money has gone into the wrong pockets and at this point and time the Minister does not have measures to mitigate illegal spending,” said Ms Munyagia. “It looks like the budget was geared towards development from the local level but that can only be achieved if the funds allocated are used in the right way,” she added.

Finance Minister Kenyatta’s attempt to increase consumption which is geared to more revenue collection has received a thumbs up. Ms Munyagia says with increased taxation, prices would undoubtedly go up resulting in less consumption, in turn, frustrating tax collection.

Agriculture took its biggest knock in 2008 following the post election violence and it was on the receiving end of a further beating from erratic rainfall and drought in large parts of the country. Against this backdrop more funding was expected. Ms Munyagia would have wanted to see more funding to re-build the sector.

“Though he should have done much more, his focus on water and irrigation will deal with over-dependence on rain-fed agriculture,” conceded Ms Munyagia.

Kenyans are growing impatient with the tax harmonisation taskforce whose mandate is to come up with recommendations to reform the tax system. Industry players have forwarded proposals to the Treasury every year but only about 10 percent of these recommendations find their way into the budget.

Ms Munyagia has expressed impatience with Treasury’s implementation saying that the country’s income tax is badly in need of an overhaul because it has been overtaken by events and there are too many loopholes.

The initial fears on the Sh109 billion to be borrowed locally pushing up interest rates and fuelling inflation have been allayed by the Minister’s pronouncement that the Pension Schemes will only invest in government securities.

It is not a guarantee that inflation and interests rates will not go up because a host of other factors are involved such as food and fuel but government borrowing will not exert undue pressure.

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