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CS hits smokers, drinkers hardest spares Wanjiku

National Treasury Cabinet secretary Henry Rotich spared Kenyan workers direct taxation instead targeting alcohol consumers and smokers to fund his Sh2.8 trillion Budget for the 2019/20 financial year.

While the Budget did not increase the cost of basic commodities such as maize, milk and fuel directly, it did not reduce their prices either as majority of Kenyans anticipated.

In his proposals yesterday, Rotich increased excise duty on cigarettes, wines and spirits by 15 per cent. A 750ml bottle of wine will now cost Sh18 more from the current price while a bottle of whisky  of same quantity will go up by Sh24.

“The excise duty on a packet of 20 cigarettes will increase by Sh8,” he said.

Insurance cover

Condemning what he called negative social effects of gaming among “the young and vulnerable,” the minister proposed to introduce excise duty on betting activities at the rate of 10 per cent of the amount staked.

The CS hit hard at the highly unregulated boda boda business with an insurance cover in a move, which will require all passenger-carrying motorcycles and tuk-tuks to cover for passengers and pedestrians.

It is expected to mitigate the increased number of accidents involving motor bikes due to careless and recklessness leading to increased cost of medication.

In what was a guarded response to recent demands by financial institutions and crafted with an eye to unlock funds to spur economic growth, the minister proposed the repeal of Section 33B of the Banking (Amendment) Act, 2016, which will effectively remove interest caps on bank loans.

“I am convinced this will unlock credit to the private sector and in particular to the MSMEs,” he said.

The CS removed import duty on raw timber to tap regional markets and to cushion the local timber and furniture industry from cheap finished timber products, retaining an-ad valorem rate of import duty at 25 per cent with corresponding specific rate of import duty on the products.

Small enterprises

Youth, women and persons living with disabilities gained big after their various funds were consolidated into one to be known as Biashara Kenya Fund.

“The Fund will give special priority to businesses owned by youths, women and people living with disabilities,” he said.

This comes even as the government helped five banks come together to deliver a pool of resources dubbed Stawi loans, which offers unsecured loans to small enterprises through a mobile platform.

The Budget aligned expenditure priorities to allow the government’s Big Four Agenda to prosper, setting aside Sh450.9billion to drive the initiative’s drivers and enabling sectors for President Uhuru Kenyatta’s economic blueprint for the 2019/20 fiscal year. To bolster the President’s legacy projects, Rotich also set aside an additional Sh338 billion to the enabling sectors, including energy and infrastructure.

“I am, therefore, proposing to allocate Sh180.9 billion for on-going roads construction projects as well as the rehabilitation and maintenance of roads,” he said.

“We have also provided Sh55.8 billion for the completion of Phase 2A of the SGR, Sh11.0 billion for the LAPSSET Project; and Sh7.2 billion for the Mombasa Port Development Project.”

This includes Sh4.5 billion for electrification of public institutions, Sh5.5 billion for Last Mile Connectivity, Sh1.3 billion for Connectivity Subsidy, Sh1.0 billion for street lighting and Sh1.5 billion for transformers in constituencies.

The CS said those earning an income of over Sh9 million per year will be slapped with a 35 per cent tax on their income while those earning over Sh564,709 to Sh9 million will be charged 30 per cent of their income by the taxman.

 “We are yet to agree on the 35 per cent and consultations between us and the employers are still going on,” Rotich clarified.

He pleaded with MPs to pass the Bill without amendments as it was for the good of all in terms of hamonisation of taxes.

Input tax

Among them, the CS said was the increased allocations to free primary and secondary school education, the Universal Health Care and Technical and Vocational Education and Training (TVETs).

Adelaide Waithera, senior tax consultant at EY said the tax proposals will protect Kenyan traders. “In this light are proposals touching on Value Added Tax (VAT) including adjusting formula for VAT refunds to enable tax payers to recover all input tax relating to zero-rated supplies and a proposal to lower the rate of VAT withholding from six per cent to two per cent which will enhance the cashflow of suppliers.”

“Generally, the tax proposals are not aggressive or harsh on the common ‘mwananchi’ as they do not increase the tax burden. It is a subtle budget statement that put into consideration the public outcry about the current state of the economy,” she said.

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