Tax proposals will bite both the rich and the poor

President Uhuru Kenyatta on Friday asked everyone to tighten their belts as he announced a raft of proposals that will see counties, Parliament, rural electrification programme, and foreign travel lose a total of Sh52.6 billion from their vote.

Citing an expensive Constitution and ambitious projects his government must embark on, and which he said should be financed by Kenyans, President Kenyatta termed his proposals as “a balance short-term pain and long-term gain”.

But as many projects suffer cut, the Judiciary, the Director of Public Prosecution and other investigative arms got a much needed cash injection in the proposals.

“The Finance Bill 2018/19 brought to me on Thursday protected the status quo and sacrificed the bigger vision. It took the easy path, instead of rising to the challenges of our time. It was good politics, but bad leadership,” President Kenyatta said in a speech to the nation at State House, Nairobi.

He went on: “The Bill fell short of ensuring that it conforms to our national aspirations, fulfil government’s basic obligations to our people, and are implementable.”

FUEL PRICES

In his speech, the President, following his rejection of the bill, proposed to the National Assembly to reduce by half the tax on petroleum products to eight percent, a move which will see petrol drop from the current Sh127 to Sh118 and that of diesel from Sh115 to Sh107.

The prices will drop further thanks to a downward review of super petrol and kerosene but diesel will go up.

“The public transport will definitely pass this eight percent value added tax to Kenyans, but that adjustment will be made accordingly, with those who had done the 16 percent having to bring it down,” Mr Simon Kimutai, the chairman of the Matatu Owners Association, said.

Mr Kimutai argued: “Having it at eight percent, it is laudable. However, much as they needed money to pay all these money we owe China and other countries, it is a good thing he thought to bring us relief. The eight percent, we just assume it like the normal way the regulatory commission usually increases the price.”

FUNDING COUNTIES

In his proposed budget cuts seen by the Saturday Nation, President Kenyatta wants the 47 counties fund slashed by Sh9.041 billion from the Sh314 billion.

Counties are already complaining of delayed and inadequate funding, and with the budget cut, the pain can only go up.

Further, he wants Sh3.8 billion taken off the Sh12 billion Equalisation Fund — the kitty meant for marginalised counties to accelerate their development to get to match the other regions.

And in what might throw members of Parliament into a Catch-22 situation — after they had bulldozed and deferred the implementation of the five-year tax on petroleum products by a further two years — the president wants the legislators to feel the strain too. And feel it hard.

President Kenyatta has proposed that MPs take a Sh18.7 billion cut in their budget.

This will be distributed by slashing Sh5 billion from the allocation to the National Assembly and the Senate, Sh6 billion that he wants removed from the National Government Constituency Development Fund as well as Sh8.7 billion that had been proposed for emergency roads in different constituencies.

MPs TO DEBATE

In his speech, President Kenyatta went on a paragraph-after-paragraph discussion of the 2010 Constitution: the 67 senators, the 349 members of the national assembly and the 1,400 members of the county assembly, 16 independent commissions as well as the Sh1 trillion that has since been pumped to the counties to make a point on why Kenyans must pay taxes.

“The enjoyment of our new rights is expensive, unprecedentedly so … We have to pay for the new constitutional order, and the public services on which Kenyans depend alike. These cost money,” the President said.

He however promised to protect the new Constitution "notwithstanding the cost". On Friday, House Minority Leader John Mbadi said that the opposition will on Tuesday morning meet to take a stand on the proposals.

Amani National Congress (ANC) leader Musalia Mudavadi, while supporting the reduction of the tax on petroleum products, warned against cutbacks in essential services provisions.

“There is an ominous twist to the President’s seeming magnanimity in the threats of cutbacks in ministries, and Parliament. The President seems to be placating hawks in his administration who had threatened that reduction of the tax will of necessity sin pro quo mean cutbacks in essential services, including universal health,” Mr Mudavadi said in a statement.

CORRUPTION

But while he has proposed budget cuts for Parliament, and counties reduced, the President wants those of the Judiciary, the Ethics and anti-corruption commission and the Office of the Director of Public Prosecutions increased to fight corruption, one of the avenues Kenyans have proposed could help manage the pinch.

Out of the Sh31.2 billion that the Judiciary asked for, Parliament allocated them less than half (Sh14.5 billion), and a meagre Sh50 million for development in what Chief Justice David Maraga said will completely cripple the Judiciary.

But it will not only be the MPs that the president wants to feel the pinch.

For you, he has proposed the slashing of funds for street lighting, rural electrification and installation of transformers by Sh1.6 billion, and a further cut by Sh1 billion on the Last Mile project, the ambitious plan to connect millions of Kenyan homes to the national grid.

EDUCATION AFFECTED

He also wants the Sh2 billion provision for cheap LPG gas cylinders halved, while proposing a Sh0.5 billion reduction in the provision for processed milk.

In the cheap gas programme, Kenyans were to get a six-kilogramme gas cylinder at Sh2,000, down from about Sh5,000.

In education, the president wants Sh5 billion removed from the Digital Literacy Programme, Sh1 billion from money meant to hire additional technical training institutions instructors, and Sh200 million from the body’s examination team.

Further, he wants Sh2.2 billion slashed from the projects proposed through public participation, popularly known as pork-barrel.

“Your taxes have paid for clear, tangible progress; this development trajectory will propel our country to new heights of prosperity,” he said.

In a bold austerity measure, President Kenyatta has proposed to cut by Sh4 billion the money used in government for foreign travel, seminars and trainings and hospitality.

“These budget cuts ask of us in government that we tighten our belts. It also ensures the sacrifices made by tax-compliant Kenyans are matched by discipline from all of us in the public service,” he said.