This archive report was first published on 26 June 2020.
Published on June 26, 2020, the 2020/2021 budget has received little attention amidst the Covid-19 pandemic. However, a closer look at the proposals reveals several provisions that could have significant impacts on Kenyans.
The global economy is experiencing a decline in growth, a trend that began in 2019 and has been exacerbated by the pandemic, geopolitical tensions, and widespread lockdowns. Kenya, like many other countries, has not taken sufficient steps to cushion the vulnerable who are most at risk.
While the government has waived examination fees for children sitting for primary and secondary school exit examinations, there is no clear plan to ensure that all Kenyan schools have access to clean water, a basic measure to guarantee hygiene in schools. Instead, the Ministry of Health has initiated a public discussion on masks, whose efficacy in prevention has not been scientifically proven and whose use has been disapproved for children under seven.
The proposed taxation on savings under the home ownership savings plan seems to contradict the government's agenda on provision of housing. It discourages savings towards home ownership, a basic need and a cornerstone of social security that gives a population the ability to engage in other social economic activities.
Furthermore, the government proposes to tax retirement savings with the National Social Security Fund and wants a cut of pension for the population above 65 years, which is currently not taxed. This could make the future bleak for retirees.
Additionally, a tax on digitally generated revenue has been introduced, which may target the youth who have a large online presence. However, in reality, many large corporates have transferred their footwork into an online presence and home delivery services, replacing income lost on physical presence in stores.
A minimum tax has also been introduced, which seems to target SMEs and other entities that continuously declare zero returns on income. However, the timing is highly inappropriate, as most small enterprises are shutting down or having to reorganize business in the face of pandemic constraints.
On the other hand, the tourism and manufacturing sector are set to benefit from the budget, with billions of shillings allocated for renovations, game parks, and conservancies. Special economic zones, exempted from regular taxation laws, are also set to receive funding for development in Naivasha and Athi River.
