The 2015/16 budget was read yesterday. Here are highligts from the speech.
- Sh287bn for County Governments, with Sh259bn of that as shareable revenue. Another Sh23.7bn set aside as conditional allocations.
- Despite tourism sector contraction, economy grew 5.3% in 2014/15 and should accelerate to 6.5-7% is 2015/16, the CS says, maintaining that pace over the medium term supported by conducive business climate and investment in energy, transport and agriculture.
- Tackling insecurity a priority. Sh223bn for security services, an increase of Sh27bn. Sh112.5bn for military security; Sh102bn for internal security. Includes Sh25bn allocated to security modernization (police and military), Sh6.4bn for Amisom, Sh7.7bn for leasing vehicles.
- Shilling under pressure against dollar. Overall fiscal deficit to be contained. Target revenue collection of 21.8 per cent of GDP. New tax measures to come.
- Corruption undermines plans. Allocated Sh2.6bn to Ethics and Anti-Corruption Commission and Sh2.2bn to DPP to enable faster investigation and prosecution. All Govt departments now required to use e-procurement module of IFMIS.
- E-procurement module to be rolled out to all departments with price reference features to prevent purchase of items above normal market prices.
- Huduma centres planned in all counties, e-Citizen online services to be expanded to increase payments for business and land transaction charges, motor vehicle fees, and services under registration of persons.
- From July 1, all imports, exports to go through single window system.
- Govt working to reduce procedures for registering business, getting electricity and registering property by 80%; reduce process, time, cost of getting construction permits and making tax payments by 50% and 60% respectively.
- Tax revenue for 2015/16 expected to be Sh1,358bn (Sh1.4trn), of which Sh1.2bn is from ordinary revenue, mostly through tax reforms and better collection by the Kenya Revenue Authority.
- M-Akiba bond platform to allow purchase of government securities via phone for only Sh3,000, down from the current Sh50,000 minimum, to be launched in July this year
- Sh143.9 billion allocated for Standard Gauge Railway, of which Sh118bn is foreign financed. Project to be completed by mid-2017. Sh55.2bn for energy, of which Sh13.2bn is for geothermal.
- Sh63.5bn allocated to ongoing roads construction and new roads planned under annuity payment programme (under PPP).
- Sh1.3bn for purchase of new ferries to serve Mombasa.
Sh79.2 for agriculture rural and urban development; Sh63bn for environment, water and natural resources. Tax incentives promised for water investments by smallholder farmers.
Sh25bn for National Youth Service (NYS) re-engineering and youth programmes. About 11,000 new servicemen to be recruited in September this year.
- Measures to support Small and Medium-sized Enterprises, including increased funding to Uwezo (Sh850m), Youth (Sh300m) and Women’s (Sh500m) funds and support for Buy-Kenya-Build-Kenya approach to procurement by State bodies.
- New stadiums to be constructed in Nairobi, Mombasa and Eldoret. Sh1.8bn allocated to Sports ministry for this.
- Sh335.7bn for education sector: Free day secondary education funds raised to Sh32.7bn, free primary education to Sh14.1bn, university education Sh52.9bn, TSC Sh181bn (cash to hire 5,000 new teachers included), and Sh17.6bn for long-delayed laptop programme.
Sh59.2bn for preventive/curative health services of which free maternity health is Sh4.3bn, leasing of equipment Sh4.5bn. Sh9.3bn for Kenyatta National Hospital, Sh5.3bn for Moi Teaching and Referral hospital.
- Sh35.2bn for Constituency Development Fund to fund only national government issues; Sh6bn for Equalization Fund which is yet to be operationalised.
- Proposed tax measures meant to encourage job creation, promote equity, ease compliance, further reforms and encourage growth. To encourage hiring of interns and apprentices, employers to get tax rebate for training ten or more youth for 6-12 months. Training levies to be consolidated into national job fund.
- To build up film industry, all payments by foreign producers to local actors and crew exempt from withholding tax. Goods and services used in film-making to be VAT exempt. Rebates proposed.
Sugar duty rate more than doubled per metric tonne from $200 to $460. Ad valorem rate remains 100pc of customs value.
- Paper and paper products now attract common external tariff at 10pc. Duty rate on hides and skins harmonised with regional rates at 80% of FOB value or 0.52 USD per kg, whichever is higher.
- Import duty rate for plastic tubes used to package toothpaste, cosmetics raised from 10 to 25pc, as is duty on fishnets. Nylon yarn, synthetic twine for making nets zero-rated.
To encourage local pasta manufacturing, semolina to be imported at zero per cent duty, down from 25 per cent.
- Importers of aluminum milk cans to pay duty at 25pc, up from 10pc, to protect local manufacturers who currently dominate regional market.
- Road maintenance levy to go up by Sh3 per litre of petrol and diesel, and to be paid into Road Annuity Fund.
- Raft of VAT exemptions mentioned, including goods-in-transit. Exemption for construction of industrial and recreational parks of more than 100 acres. Import Declaration Fee lowered from 2.25pc to 2pc.
- Prison officers to enjoy similar duty-free import privileges as members of Kenya Defence Forces and Kenya Police.
- VAT law amendment proposed to allow returning owners of LHD vehicles in diaspora to sell vehicle and buy RHD vehicle of similar value for import into country.
- Tax amnesty for landlords on all arrears declared. Residential rent income to be taxed at 12pc of gross for rental revenues below 10 million a year.
- New gaming tax to be charged on gross revenues. Lotteries to be taxed at 5pc of turnover, bookmakers at 7.5pc of total income. Premium competitions taxable at 15pc.
- Excise duty bill proposes new charges on harmful items to be levied on unit of quantity — sticks of cigarettes, volume of alcoholic or sugar sweetened beverage, motor vehicles by age, weight of plastic bags. Goods with no harmful effects no longer taxable under new excise law.
Tax Procedure Bill to introduce standardised procedures, simplify the laws and reduce cost of compliance.
- Amendment of law proposed to require applications for tax refunds within 12 months of the date the tax became due and payable. Income tax act amendment for extractive industry to harmonise tax treatment at the withholding tax rate of 12.5pc and 5.6pc for training and contractual services, respectively.
- Controversial 5pc Capital Gains Tax on sale of shares dropped in favour of 0.3pc withholding tax on the transaction value.
- Minimum core capital for banks to be raised from Sh1bn to Sh5bn by 2018, that for insurance firms to also rise by that year (Sh600m for general insurance, Sh400m for long term business). Annual licensing of banks scrapped in favour of non-renewable perpetual licences.
- No stamp duty for transfer of assets into Real Estate Investment Trusts and Asset Backed Securities. Retirement funds to invest up to 10pc of funds in licensed Private Equity and Venture Capital funds, with a cap of a 15pc stake in any single issue(r).