A budget is an estimate of income and expenses over time. We prepare budgets at our homes, places of work, and even at our business. Especially when organising events such as parties, weddings, a budget is prepared to know how much you need in advance. Similarly, the country prepares a national budget every financial year. In Kenya the government year starts around June, this is when the Treasury Cabinet Secretary presents the national budget. 

On Thursday 13th June 2019 treasury cabinet majestically walked into the National Assembly in a pop and colour, a tradition where the Cs carries the budget in an iconic briefcase with a court of arms symbol and the boutonnière worn on the lapel of the  suit jacket accompanied by Treasury Ps, the outgoing KRA Commissioner General and the Incoming Commissioner General and the Central Bank Governor to present a budget on how Kenya would spend as well as how the budget would be financed.

Kenya’s budget amounts for the financial year 2019/2020 is Ksh 2.8 Trillion, approximately 3 Trillion. The government will spend this amount in delivering essential services as well as development projects. The government has set four priorities that most projects are going to be aligned. These are the big four agenda;

1. Universal Health Coverage
2. Affordable Housing
3. Manufacturing
4. Food and Nutrition Security.

The budget amount is expected to be raised through taxes and the deficit-financed through borrowings.

Kenya Revenue Authority has been given a target of Ksh 2.1 Trillion to raise through taxes in the financial year. The deficit of Ksh 607.8 Billion will be borrowed internally within Kenya and some acquired externally. External borrowing has been estimated at Ksh 324.3 Billion while internal borrowing has been set at Ksh 283.5 Billion.

The big four projects have been allocated a total of Ksh 450.9 Billion.

1.Health

Within the healthcare, the government is aiming at providing universal health care to Kenyans. Money has been allocated to support programs that are aligned towards universal healthcare such as the NHIF cover. The government had conducted a pilot program in four counties; Machakos, Kisumu, Nyeri, and Isiolo, and it expects to scale the program in all other counties.

2.Housing

In a move to provide affordable housing, the government has allocated Ksh1 Billion to the newly formed Kenya Mortgage and Refinance Corporation. The company is expected to advance affordable mortgage loans and also inject liquidity to acquire homes.

3. Manufacturing

Under this agenda, the government aims at transforming Kenya into a middle-income country as well as creating more jobs. The theme for the current year’s budget actually touched on Job Creation, “Creating Jobs, Transforming Lives-Harnessing the Big four plan.”

The government will be reviving companies that will provide employment, for instance, it is expected to revive the RIVATEX company, which is expected to create over 3,000 jobs.

Biashara Fund

The government will consolidate the Uwezo Fund, Youth Enterprise Development Fund, and Women Development Fund to be Biashara Fund that will give priority to the business owned by the youth, women, and Persons with Disabilities.

Ajira Digital Programme

With the phrase that “online work is wok” the government under the Ajira Digital program aims at bridging the gap between skills available and the skill demand. The government expect that it will create over 1 million youths’ jobs annually to be engaged in the programme.

The CS has proposed an amendment in the Income Tax Act to exempt income that will be earned from the Ajira Programme from regular tax.

Tax Changes

Raise in Capital Gains Tax (CGT)

CGT has been raised from current 5% to 12.5% on transfer of property, however, there will be an exemption where a company is transferring property for restructuring purposes so that it can operate efficiently as well as market penetration.

Expansion of Withholding tax base

More services that did not fall under the ambit of the tax regime have been added. These services include:

• Security services
• Catering services offered outside the hotel premises.
• Transport services
• Cleaning and fumigation
• Sales promotion
• Marketing and advertisements services
• Transport of goods excluding air transport

Value Added Taxes

Withholding tax rate on VAT will be reduced from the current 6% rate to 2% to help reduce the build-up of VAT refunds and also enhance cash flow in a business.

The VAT refund formula will also be adjusted to ensure taxpayers can recover the portion of input tax relating to zero rates supplies.

The VAT will be exempted on all locally produced computer motherboards and all inputs used in their production.

Environmental Conservation

VAT has also been exempted on all services used in the construction of plastic recycling plants as the government encourages environment conservation.

In addition all companies that do plastic recycling business will be taxed at a lower corporate tax rate of 15% for the first 5 years.

Also, motor vehicle that are powered by electricity imported into the country will enjoy a reduced exercise duty by 10%.

Taxation of the Digital Economy

The income tax amendment will see income earned in the digital economy also brought into the tax net.This targets business and foreigners that sell goods and services to Kenyans online though the internet. Two clauses will that will allow the law to bring the digital economy;

• Income tax includes the income accruing through the digital market place.
• Digital market place means a platform that enables, by electronic means, direct interaction between buyers and services.

Re-introduction of Turnover tax.

With the previous finance bill having replaced the turnover tax with Presumptive tax the finance Bill for 2019 proposes re-introduction of turnover tax at 3% on gross sales of a business payable monthly for a business that doesn’t exceed 5million shillings annually.

Wrap up

The budget was a relief to some sectors and not to all across the economic sectors.On a general overview of the common mwananchi, the burden is too much. The high cost of living, which the budget did not address by the reduction in price of common commodities prices through subsidies. The budgeted amount is also another big figure which may not match our economy, already experts have put on notice of our appetite for loans as Kenya seeks more and more loans for development especially the Chinese debt for the SGR project.

2019/202 Kenyan Budget Summary