This archive report was first published on 22 June 2020.
On June 22, 2020, Treasury Secretary Ukur Yatani faced a tough balancing act in his effort to cut the fiscal deficit and tame public borrowing after MPs scrapped a number of proposed taxes, creating a Sh9 billion hole in his budget.
The National Assembly's Finance and National Planning committee cancelled taxes proposed on pensions, helicopters, and liquefied petroleum gas (LPG), which had been targeted to generate Sh8 billion through a 14 percent value-added tax (VAT) on helicopters, tractors, aircraft tyres, cooking stoves, and motor vehicle imports.
Additionally, the Treasury had looked to raise Sh320 million from the removal of zero rating on LPG and Sh771 million on the removal of import declaration fees on helicopters.
However, MPs argued that taxing helicopter imports and parts would hurt the aviation industry, which was recovering from the coronavirus pandemic.
‘The aviation industry has been one of the most affected sectors by the Covid-19 pandemic. Time should therefore be given to allow the industry to recover before the imposition of the taxes,' the Joseph Limo-led committee on National Planning said.
The Treasury had hoped new tax measures, together with scrapping of exemptions, would help raise an additional Sh38.85 billion to increase Kenya Revenue Authority collections to fund the Sh3.2 trillion budget.
The MPs' decision is set to further widen the deficit, which currently stands at Sh840 billion, raising appetite for public loans.
