As the country awaits President Uhuru Kenyatta’s decision on the Finance Bill, 2018, National Treasury and Parliament’s technical committee are burning the midnight oil to re-look the budget framework.
It is widely expected that non-priority areas in the development budget could be on the chopping board to bridge the budget deficit in case the contentious 16 per cent Value Added Tax (VAT) is suspended or scrapped.
The Chairman of the Budget and Appropriations Committee Kimani Ichung’wa yesterday said Parliament was meeting Treasury officials to re-examine the 2018/19 budget, with a view to getting resources to plug the Sh71 billion deficit in case President Uhuru Kenyatta signs the Finance Bill 2018 in its current form.
Ichung’wa hinted that the two-day meeting would try to find areas where Treasury could make cuts in the remaining three-quarters of the budget and plug the expected deficit in case the VAT Act 2013 in suspended for two years as proposed by Parliament.
“We have been discussing the first quarter of the budget, which is coming to an end this month and see what has happened. We will also look at what has been budgeted for in the remaining three quarters,” Ichung’wa said.“Whether there will be budget cuts or not, that is a decision that will be made by Treasury if they find it necessary to do that at an appropriate time. They will inform the Budget Committee to make a decision at that time,” he added.
The Cabinet Secretary Raphael Tuju who had accompanied President Kenyatta to China last week told a local TV station over the weekend that the buck “stops with Parliament and Treasury” on areas to make budget cuts. “The technical committee from Parliament and the National Treasury are discussing these (Finance Bill and 16 per cent VAT) to see how to have a balanced budget so that when the Finance Bill goes to the President for assent, it ought to show where the money will come from. If it has to go though borrowing, that has to come from Parliament as well,” Tuju said.
“Parliament prepared the budget; they made provisions for various things including the money going to counties, even the money for CDF was increased by Parliament this year. So if we are going to have a deficit of about Sh70 billion, we need to know where that money is coming from. Are governors ready to take 16 per cent off their budget? Are MPs ready to take off 16 per cent off their CDF?” he asked.
According to Francis Kamau, Tax Partner at Ernst and Young, the President has the option of not signing the Bill and sending it back to Parliament, with recommendations to Treasury to amend and introduce other taxes, especially Excise Duty and Income.
“The Treasury can introduce another ‘sin tax’, (tax on alcohol and tobacco products) to raise more revenues. Treasury can also widen the tax base by raiding on those traders not captured, for instance in the single business permit but are doing business. He, Cabinet Secretary Henry Rotich (pictured), can also raise the corporate tax from the current 30 per cent to 32 per cent to get money to fill the deficit,” said Kamau.
“But the easiest thing to do is to cut wastage of funds, especially due to corruption and introduce austerity measures by cutting on allowances, mileage claims, unnecessary travel and hospitality as is happening in Tanzania,” he added. Former MP for Kitutu Masaba Timothy Bosire, a former member of Budget and Finance committee, told People Daily Treasury had few options to wriggle out of the fuel levy and the subsequent crisis that has caused uproar.
“We had good intentions when we passed the VAT Act of 2013. We suspended it for three years because projections were that by 2016 the economy would have grown to around 7 per cent and easily to absorb the tax but unfortunately it grew to around 5.7 per cent. We were again forced to postpone it to two more but regrettably in 2018 the economic performance is worse. So MPs did not blindly pass the Act,” he observed.
Bosire also said that apart from the government initiating an aggressive campaign to address corruption, Treasury could review the budget by cutting funds from non-priority projects. Additional reporting by Harrison Kivisu.