The Standard ­ Friday
Date: 24.03.2017
Page 4
Article size: 465 cm2
ColumnCM: 103.33
AVE: 268666.66
No tax increase in Sh2.6 trillion
budget to be presented next week
State says it will 2017/18 through
manage to fund its existing taxes and
spending plan for borrowings
By PATRICK ALUSHULA
The Government has promised
not to burden Kenyans with addi­
tional taxes as it presents its Sh2.6
trillion budget for the 2017­2018 fi­
nancial year.
In the budget to be read next week
on Thursday, the National Treasury
says that in the absence of one­off
expenditure such as drought mitiga­
tion, election funding, and the stan­
dard gauge railway, the pressure on
the budget deficit has gone down and
the remaining shortfall can be funded
Dr Thugge said Treasury expects
the 2017­18 budget to have a deficit
in the range of six to 6.5 per cent of
GDP. This, he said, is a significant nar­
rowing compared to nine per cent in
the current financial year.
In the medium term, Thugge was
upbeat that the deficit would narrow
to four per cent. And excluding SGR,
he sees it going further down.
According to Thugge, the Govern­
ment is forecasting the nominal gross
domestic product (GDP) to hit Sh8.5
with the current taxation levels.
trillion, up from Sh7.2 trillion that it
A budget deficit occurs when a expected in the current year.
On the assumption that the Gov­
government's expenditure exceeds
the revenue it generates, excluding ernment can maintain the same ratio
of tax revenue to GDP, Thugge said the
money from borrowings.
Both salaried and non­salaried economy can comfortably add Sh200
Kenyans, the Treasury says, should billion without going for new tax mea­
not expect additional or enhanced sures.
taxes to fund the increased budget.
The Treasury bosses said the Gov­
"We are not planning to raise in­ ernment will go to the external mar­
come taxes. If you will listen to the kets to borrow Sh205 billion to meet
budget reading next week, there will the budget deficit of Sh523 billion.
be no proposal in raising income tax­ Domestically, it intends to borrow
es," said National Treasury Principal Sh318 billion.
Secretary Kamau Thugge.
Since interest on domestic debt
is almost three times that of external
REST EASY
His view was supported by Geof­
frey Mwau, the director general for
Budget, Fiscal and Economic Affairs
at the Treasury. They said the growth
in the economy has been matched
with higher collections and that Ken­
yans should rest easy.
"When the economy grows, rev­
enue and GDP grows. This coming
year, we expect Shi.77 trillion (from
market, Thugge said the ministry es­
Union, so we may not have conclud­
ed that. That can continue even after
the speech," he said.
Even without the tax increase,
which is likely to excite voters, tax ex­
perts are warning that there could be
a major shocker in the aftermath of
the budget that will overshadow this
rare gesture from the Government.
According to Asif Chaudhry, a part­
ner at PKF Kenya, a tax and advisory
services firm, the early timing of the
budget to pave the way for the elec­
tions could mean that Treasury has
not had enough time to plan and put
implementation structures in place.
"I do not think the budget will re­
ally say much. It might be a formality
budget and might not have major pol­
icy proposals. There is nervousness as
to whether they are ready to present
the budget or whether we have to get
it out of the way because of the elec­
tions," he said.
Nikhil Hira, a partner and tax lead­
er at Deloitte East Africa, said Ken­
yans should only celebrate after the
supplementary budget.
• There will be no one­off expenditure
such as drought mitigation, election fund­
nal one Sh80 billion.
ing, and the standard gauge railway
The budget, coming earlier than • Budget shortfall can be funded with cur­
that of its counterparts in the region rent taxation levels
timates interest on domestic borrow­
ing to be Sh210 billion and the exter­
as it has been the tradition, has seen
government planners come to the ta­ • Growth in economy has been matched
ble sooner than before to juggle be­ with higher collections
tween the supplementary budget for
the current year and the next finan­
based on growth and other factors cial year.
driving the economy. Don't brace for
Treasury has indicated that the
the current Shi.5 trillion) and this is
tax increases. That is not going to hap­
pen," assured Dr Mwau.
to do it at the same time. There will
still be consultation on the Customs
other countries of the East Afri­
• The expected budget deficit is lower
than that of the current budget
• There is an expected GDP growth of
Sh8.5 trillion
ca Community have given it the go­ • The economy can comfortably add
He criticised investment analysts
ahead to read the budget, which will Sh200 billion without going for new tax
for "misleading the public" that ad­
measures
not pre­empt anything touching
ditional taxes are in sight to fund the across the borders.
• Sh205 billion will be externally bor­
budget that is now double the size of
"There is no legal requirement rowed
the 2012­13 expenditure.
Ipsos Kenya ­ Acorn House,97 James Gichuru Road ­ Lavington ­ Nairobi ­ Kenya
The Standard ­ Friday
Date: 24.03.2017
Page 4
Article size: 465 cm2
ColumnCM: 103.33
AVE: 268666.66
Treasury Principal Secretary Kamau Thugge during the pre­budget breakfast
meeting with the media at Hotel Intercon Nairobi, yesterday, [photo: moses
REASONS FOR NO TAX INCREASE
Ipsos Kenya ­ Acorn House,97 James Gichuru Road ­ Lavington ­ Nairobi ­ Kenya