Tax increase in Budget unlikely, Githae promises - The Standard

Updated Monday, March 18 2013 at 00:00 GMT+3

By James Anyanzwa

Kenyans might be in for a reprieve as the Government rules out the possibility of increasing taxes to finance rising public expenditure in this year?s budget (2013/2014).

Finance Minister Njeru Githae has also slowed down plans to borrow heavily from domestic and international markets to finance budgetary shortfalls.

Instead, Treasury will expand its revenue base by pulling new economic sectors into the tax brackets.

?We don?t want to borrow more both from the domestic and external markets. What we want to do is to increase on revenue base and enlarge our tax envelope to ensure more people pay taxes,? said Githae, told The Standard adding that, ?We could have new taxes but not increase the current ones.?

The minister, however, opted to keep the identity of the targeted sectors under warps, saying Treasury is still in the process of reviewing them.

?We are looking at them sector by sector,? he said.

Last year, Githae tabled what was widely seen as a populist budget, unleashing plenty of goodies to the poor and the marginalised groups and leaving them smiling with no tax to pay in return.

Financial backlash

But as the minister moved to appease the masses, the agony of a financial backlash could not be underscored. He immediately raided landlords with plans to recover about Sh90 billion in rent tax.

But even as the minister reviewed his financing options, the glaring deficit in the books could not be narrowed further without a plea to the development partners. The development partners? contribution to the budget during the 2012/2013 financial year is expected to reach Sh225 billion, representing a 22.9 per cent growth.

During the 2012/2013 Budget, Githae planned to borrow Sh169.3 billion from the development partners to finance part of the ballooning budgetary deficit. Githae tabled an ambitious Sh1.45 trillion Budget, of which Sh1 trillion would be used to finance recurrent expenditure, with only partly Sh451.7 billion going to development. The minister expects to finance his budget through Kenya Revenue Authority (KRA) ordinary revenues (Sh870.5 billion), other ordinary revenues (Sh86.1 billion), external grants (Sh56.2 billion), External loans (Sh169.3 billion) and domestic borrowing (Sh277.8 billion).

Last week, the Government announced that it had revived plans to issue a sovereign bond with intentions of raising $1 billion (Sh86 billion) from the international capital markets in the second half of this year.

Source: http://www.standardmedia.co.ke/?articleID=2000079557&story_title=Business:%20Tax%20increase%20in%20Budget%20unlikely,%20Githae%20promises

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