|Finance minister, Amos Kimunya Thursday extended a hand to the poor as he swooped on conspicuous consumption.
|Finance Minister, Amos Kimunya. Photo/ FILE
The minister removed import taxes on rice and wheat in a move aimed at reducing the cost of basic foodstuffs.
He also removed duty on imported maize, a key measure as the country moves to build a national food reserve and avert looming hunger.
The youth were among the key beneficiaries of a raft of measures meant to promote social stability by addressing inequalities and unemployment.
And conscious of the rising cost of living, the minister, while reading his third Budget speech, steered clear of increasing income tax and resisted the temptation to increase Value Added Tax (VAT), which would have weighed heavily on already besieged consumers.
But with the need to fund reconstruction after post-election violence, and lay a foundation for economic growth in mind, the minister unveiled new tax measures to finance his Sh760 billion Budget.
Among those likely to be hit hard by the new measures are smokers and drinkers — and MPs, whose allowances are to be taxed.
The minister also outlined steps to raise a substantial amount of money from both the local and foreign financial market through bonds.
The financing strategy for this year’s Budget, which has a Sh127 billion deficit, will hinge heavily on how the market receives these instruments.
“This is by far the most difficult Budget since I became Finance minister in 2006,” Mr Kimunya said.
“We are conscious that raising taxes under the current environment is the most undesirable option.”
Besides MPs, constitutional office holders, including judges, commissioners and the AG are the only group likely to pay higher taxes after the minister proposed that their allowances be brought under the tax net.
The Budget speech, the first under the Vision 2030 programme, highlighted four key priority development areas: Restoring the economy to boost long term growth; creating jobs for the youth; reducing poverty, and improving human development.
Mr Kimunya also proposed a raft of incentives from increased infrastructure funding to promote industrial technology and innovation.
“The Government will do all it can to contain inflation and restore the economy to high growth,” he said.
He also reduced import duties on cereals from 35 to 10 per cent, while emphasising the Government’s commitment to control fuel prices by increasing participation in the retail market.
To ease unemployment, which the Government has recognised as one of the major contributors to post-election violence, the minister increased the Youth Fund by Sh500 million.
VAT on motorcycles of up to 250cc will be zero rated to make them cheaper.
Motorcycles have in the recent past become a key means of transport in rural areas and some towns.
Information, Communication and Technology (ICT) sector got Sh900 million to build a business outsourcing park expected to create at least 10,000 jobs annually.
Mr Kimunya also put aside Sh1 million to finance community soccer competitions in each constituency.
“This will make sure that the youth are continuously and constructively engaged,” Mr Kimunya said.
Middle and upper classes were hit with sin taxes as the minister moved to plug a Sh127 billion deficit.
Excise duty on certain types of spirits, beer and cigarettes were increased to pay for the increased social spending.
For cigarettes, the duty has increased by Sh7 per packet in what Mr Kimunya said would be smokers’ “token” contribution to national development.
For malted beer, the excise tax was increased by Sh4 per bottle while for non-malt alcoholic drinks, the tax went up by Sh5.
Significantly, the minister also moved to instil discipline and order in the capital market as a way of securing investors and raising their confidence in the market.
Stockbrokers and investment banks have three years to restructure their boardrooms and increase their paid up capital.
Any individual holding more than or 25 per cent of shares in a brokerage or investment company will be restricted from holding any management position.
The two will also be required to inject more capital to Sh50 million for brokerage up from current Sh5 million while investment banks will need to increase to Sh250 million.
To stem cases of fraud and misappropriation of clients’ money, the Capital Markets Authority was empowered to freeze assets of senior owners and managers “upon reasonable suspicion of impropriety.”
The minimum requirement for banks was increased from Sh250 million to Sh1 billion. Banks have three years to comply with the new requirement.
Forex bureaux will also be more strictly regulated with the minister proposing stiffer penalties for those that fail to comply with the new regulations.