NAIROBI, Kenya, Jun 7 – National Treasury Henry Rotich is Wednesday afternoon expected to tell Parliament how he will finance the Sh2.3 trillion national budget for the financial year 2016/2017.
Speaker of the National Assembly Justin Muturi says Rotich is expected to present his revenue measures in Parliament starting at 2.30pm.
“The Cabinet secretary for the National Treasury will present to the National Assembly the budget highlights and revenue raising measures for the national government for the 2016/2017,” Muturi said on Tuesday.
According to the 2016/2017 budget estimates, the Treasury is expected to collect Sh1.49 billion.
This comes even as the Kenya Revenue Authority (KRA) missed its target for the nine months ending March this year.
KRA collected Sh842.5 billion against a target of Sh911.5 billion with the Commissioner General John Njiraini attributing it to slow growth in customs taxes especially during the first six months of the financial year ending December 2015.
The collection was however a revenue growth of 11.7 percent compared to the previous year.
Among the tax measures implemented in the last financial year include tax on residential and rental business, Rotich proposed to tax landlords on a growth rental income at 12 percent for income below Sh10 million per year. In addition, the CS introduced a tax amnesty for landlords who are outside the tax net.
Lotteries were also taxed at five percent of turnover while road maintenance levy was increased by Sh3 per litre of petrol and diesel that will be paid in the Road Annuity Fund.
Beer, bottled water, juices and second hand cards and motorcycles also attracted tax in the last financial year.
Financial Analyst at PKF Michael Mburugu expects less or zero new tax measures introduced to fund the budget.
Mburugu is of the view that government is likely to finance the coming 2016/2017 budget deficit through heavy external borrowing.
He however says if that will be prudent for the government to avoid borrowing locally as that would lead to escalation of commercial lending rates.
“I don’t think the focus will be to expand the taxes, because over the last many years, the government has been bringing in new taxes like the capital gains tax. There is likely to be huge funding deficit and the government will obviously be borrowing and we expect it would be external,” Mburugu said.
According to the 2016/2017 budget estimates, overall expenditure and net lending is projected at Sh2.26 billion up from the estimated Sh1.84 billion in the current financial year.
Domestic financing of development plans is estimated at Sh398.4 billion up from Sh305 billion while the country has received commitments worth Sh410.6 billion in external financing.
In the executive summary, Rotich said external borrowing will largely be biased towards concessional loans.
The budget which has been prepared during a slow global recovery will focus on economic growth and sustainable development.
According to the latest report from the Treasury, resources will be allocated to security food security and agriculture, transport and logistics, flood control and water harvesting and other key projects so as to drive inclusive growth.