Treasury CS Set to Raise Taxes in New Budget Plan

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    Treasury CS Ukur Yatani (right) poses for a photo at Treasury Headquarters, Nairobi on Thursday, June 11, 2020, ahead of Budget 2020/21 presentation
  • Treasury CS Ukur Yatani is contemplating raising taxes to fund the country's 2021/22 Ksh 3 trillion budget as the government attempts to avoid taming its borrowing appetite. 

    The CS, on Monday, January 25, released the 2021 Budget Policy Statement (BPS) for public participation. The document disclosed that the 2021/22 budget was estimated to be Ksh 216 billion more than the Ksh 2.81 trillion 2020/21 budget

    Expanding the budget may see Kenya raise its debt ceiling above Ksh 9 trillion and a huge expenditure outlay will leave the country with a deficit of Ksh 1 trillion. Yatani wants to avoid borrowing the Ksh 1 trillion and is looking at other ways to raise the cash. 

    Apart from increasing taxes, the CS may opt for widening the tax net to increase the number of people who pay taxes and also to seal all tax revenue leakages. 

    Times Towers in Nairobi which houses Kenya Revenue Authority’s head office. Thursday, February 20, 2020.
    Times Towers in Nairobi which houses Kenya Revenue Authority’s head office. Thursday, February 20, 2020
    Simon Kiragu

    The Kenya Revenue Authority (KRA) reached out to Kenyans, on Monday, January 25, asking to be assisted in achieving its Ksh 1.5 trillion revenue target for 2020/21. The taxman expects increased participation from the public in reporting tax evasion and bribery cases. The revenue will be crucial in funding the next financial year and also setting KRA's target for 2021/22. 

    "We expect revenue collection in the financial year 2021/22 to spring back, buoyed by the improving economic environment, tax policy and revenue administration measures that we have put in place," Yatani said in the BPS document. 

    Taking the Ksh 1 trillion loan will mean President Uhuru Kenyatta would have incurred Ksh 6 trillion in loans between 2014 and 2022, which is about three times more than former Presidents Mwai Kibaki, Daniel Moi and Jomo Kenyatta combined. 

    The Big 4 Agenda and reviving the economy contribute to the rise of the budget as more money is expected to fund development projects. 

    Yatani, however, defended the new budget plan, saying that development agendas will double the economy by Ksh 5.6 trillion by June 2022. He added that the Jubilee government had raised income per person to Ksh 204,783 in 2019 from Ksh 113,539 in 2013. 

    "This enabled us to generate around 827,000 new jobs per year between 2013-2019, up from 656,500 in 2008-2012. GDP per person has nearly doubled over this period," Yatani said. 

    In January 2021, Treasury raised the rate of the pay-as-you-earn (PAYE) tax to 30 percent, up from 25 percent, effective from January 1 and also expanded the tax bracket. The President also scrapped off tax reliefs lest for those who earn less than Ksh 24,000 per month. 

    Moreover, the government introduced new taxes, including the Digital Service Tax on transactions conducted online and Minimum Tax to increase revenue. 

    Uhuru New Years Message 2021
    President Uhuru Kenyatta reading his annual New Year's eve speech on 31st December 2020
    tax evasion