Next FY holds big promises for common man
Robert Maina
Nassim Nicholas Taleb has elaborated in his book the “black swan theory” that basically refers to unexpected events of large magnitude and consequence.
These events have a dominant role in history and are extreme outliers.
As a matter of fact, it is often said these events render the work of many predictive analysts nugatory due to their massive unpredictable.
While a lot is still unknown about Covid-19, it is easily set to become a black swan and no doubt a historic event that will forever be etched in the memories of humankind.
The FY 2021/22 national budget is being presented with full realisation that while the world is slowly adapting the realities brought about by the pandemic, the government has a critical role to play to stabilise the economy.
The economy has been projected to grow by 6.3 per cent in the coming financial year, from the current 3.8 per cent.
This ambitious growth rate is set to be achieved through a mix of fiscal and monetary policies as set out in the budget policy statement and the Finance Bill, 2021.
These policies are set to cushion mwananchi from adverse effects of Covid while at the same time spurring economic growth.
Limited space
Financing of the budget has over the years remained the biggest headache for the government with our uptake of debt growing by the day.
National Treasury has indicated that it is seeking to raise the country’s debt ceiling to Sh9 trillion just less than two years ago following the increase of the ceiling to Sh6 trillion.
Kenya’s national debt is both external and internal. In the past one year, the country has received several loans.
Some notable funding received include a loan from the IMF of US$739 million plus an additional $2.4 billion to assist the government roll out of Covid-19 response measures.
The limited fiscal space has jolted the government to explore various taxation measures that are meant to expand the tax base and thus increase tax revenue collections.
Some of the salient tax measures the government aims to introduce in the next FY include the introduction of more restrictive conditions for multinational enterprises to get interest expense deductions on their borrowings.
Additionally, there will be increased transparency of their operations beyond Kenya with the introduction of a requirement to disclose certain critical financial and non-financial information relating to their foreign operations.
Tax measures
The government also seeks to further expand the scope of digital services tax.
This is basically set to bring into to the ambit of taxation all players in the digital space, who have an income generating online presence whether they are resident in Kenya or otherwise.
On the other hand, some of the sectors that are set to benefit are the energy and healthcare sectors.
The government proposes to allow independent power producers who supply electricity direct to consumers to enjoy certain tax benefits on their investments.
From a healthcare sphere, contributors to national insurer are set to start enjoying insurance relief.
By and large, the proposed changes represent a delicate balance between expansion of the tax base and protection of the wellbeing of the common mwananchi.
The government will no doubt walk a tightrope to ensure the rights of Kenyans are protected and at the same time run its affairs. — The writer is a Senior Tax Manager at EY
