This archive report was first published on 16 June 2020.
On June 11, 2020, National Treasury Cabinet Secretary Ukur Yatani unveiled a Sh2.8 trillion budget for the 2020/21 financial year, aimed at reviving the economy ravaged by the pandemic.
However, tax and audit firm Ernst and Young (EY) argues that the government's intervention falls short by Sh170 billion, which is approximately two per cent of the country's gross domestic product (GDP).
According to EY, at least four per cent of GDP is required to jump-start a battered economy like Kenya's. In a report on the 2020/21 budget, Christopher Kirathe, a tax expert at the firm, stated, 'At least four per cent of GDP is required to jump-start a battered economy like ours. Based on this, the government intervention falls short by about Sh170 billion.'
Yatani's budget includes a Sh53.6 billion stimulus package set to be injected into key sectors of the economy in the next financial year. The government hopes to collect Sh1.6 trillion in revenue, but EY believes this will be an uphill task due to the negative impact of the coronavirus on both people and businesses.
Furthermore, to help achieve the revenue target, Yatani announced plans to roll back some tax exemptions with 31 goods set to see an increase in excise duty by 5.5 per cent, which sets the stage for higher retail prices effective July.
According to Kirathe, 'Kenya's primary tax revenue streams are from a range of income, property and consumption taxes. The combined weakening economy resulting from the closure of businesses, laying off of employees, locked down global supply chains, all to put to test the government's assumption that it will collect the projected Sh1.62 trillion.'
EY suggests that seeking loan moratoriums on both principal and interest would have helped the country in redirecting the money to restart the economy.
