Brace for higher taxes ahead of Thursday’s Ksh.3.5 trillion budget reading
Regional audit and tax advisory firm PKF is warning Kenyans to brace themselves for tougher economic times ahead of the Ksh.3.5 trillion budget that is to be read on June 10, 2021, by Treasury Cabinet Secretary Ukur Yatani.
The budget proposes to introduce Value Added Tax (VAT) on essential goods including bread and the minimum tax that was introduced in the finance bill 2020.
It will be the first time the budget will be read without the country’s economic survey report.
According to PKF, Kenya’s lack of a clear tax policy will continue to discourage investors due to uncertainty in the business environment.
“To increase tax on basic commodities is the wrong thing to do at such a time. The minimum tax has been suspended by High Court for the time being and obviously has an impact to cripple both small and big businesses if not looked at,” said Michael Mburugu, Partner, PKF.
PKF is calling for the restructuring of the country’s debt to match the life of key ongoing projects to avoid getting into a debt trap. It recommends alternative sources of financing such as the Public Private Partnerships (PPP).
Kenya’s debt has ballooned over the last few years with 50 percent of the debt being foreign, and therefore the stability of exchange rates will play a big role in the sustainability of these debts going forward.
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Most of this debt has been expended towards big infrastructural projects whose benefits will be realized in the long term.
However, the firm has lauded the introduction of the common reporting standards and country by country that will compel Kenyans and Kenyan multinationals to reveal details of their offshore accounts.
The firm has also challenged the government to allow private sector importation of covid-19 vaccine to fasten the inoculation process.
Kenya’s economic recovery is heavily dependent on her ability to contain the COVID-19 virus, said PKF.
“Our expectation is that government should now be concentrating on vaccinating citizens which view to get as many people vaccinated as possible. Through that way we will be able to reopen our economy in a sustainable manner,” added Mburugu.
The global shortage of vaccines coupled with Kenya’s slow-paced vaccination drive has left the country at risk of more infections that could derail its recovery efforts.
The audit firm further wants the government to collaborate with countries that have a surplus supply of the vaccines including the United Kingdom and the United States to boost its acquisition of vaccines and chances of beating the virus.