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Kenyans among world's most taxed people

30 June 2014, 15:00 Amal Mohamed

In preparation for the new financial year starting July 1, Kenya’s Finance Cabinet Secretary Henry Rotich, Tanzania’s Finance Minister Saada Mkuya Salum and Uganda’s Finance Minister Maria Kiwanuka made their budget speeches before their respective Parliaments and public.

Kenya’s budget leads the pack as the most expensive at a whopping 1.77 trillion Kenya shillings ($20.34b), followed by Tanzania's 19.5 trillion Tanzania shillings ($12b) budget and then finally Uganda’s 14 trillion ($5.39b) budget. The budgets heavily rely on domestic revenue to cover projected costs of planned infrastructure and growth plans.

“83.6 percent of the budget will be funded by Kenyans themselves by way of taxation. The rest will be mitigated through appropriations in aid where our development partners will come in handy,” stated Cabinet Secretary Rotich.

According to the Price Waterhouse Coopers’ Paying Taxes Report 2014, Kenyans are among the most taxed people in the world.

Kenya is yet to resolve the funding hole for its previous 2013/2014 budget. This year’s KES 1.7 trillion budget has a deficit of KES 342.6 billion.

“To sustain the momentum of tax reform and modernization, we will review the Income Tax Act from July this year. During this review, we shall consider the many submissions presented by stakeholders, in addition to benchmarking the new Bill to international best practices,” he announced.

Among the other proposals by Rotich were widening the tax bracket to ensure that they net more Kenyans to contribute towards revenue generation.

Tanzania seeks a total of 19.8 trillion Tz shillings from both domestic and foreign sources to finance its budget.

It seeks to increase revenue collected by abolishing tax exemptions which affects investors and private companies, including telecommunications operators who have until now enjoyed the exemptions.

Salum further stated that the government will seek to cut costs by implementing the bulk procurement system, and eliminating agents in public procurement processes.

In Uganda, Kiwanuka announced that domestic revenues including taxes and borrowing will finance over 80 percent of the budget. Of the total budget, UgSh10.1 trillion will come from domestic revenues. To meet this increasing government expenditure, Kiwanuka proposed new tax measures on mobile money withdrawals, sports betting, petrol and diesel. The increase in excise duty, however, is predicted to lead to a rise in the price of sugar.

She also proposed capital gains tax on the sale of commercial property. Kiwanuka also brought back the proposal to impose 200 Uganda shillings tax on a litre of kerosene. This proposal was in the 2013/14 budget but was rejected by Members of Parliament late last year. On sports betting, Ugandans who win money will be required to part with 15% of the money as tax. These measures are expected to raise close to 200 billion Uganda shillings in the next financial year at the cost of taxpayers.

Unresolved corruption and misuse of public funds that have marred the three countries has seen donors withdraw budget support and instead focus on project support. This in turn means that budget funding will increasingly be derived from tax.

In the rest of East Africa, Rwanda unveiled a Rwf1.75 trillion budget compared to Rwf1.6773 trillion this financial year in its budget statement. In stark contrast to Kenya, Tanzania and Uganda, the Rwandan government announced a wide range of tax exemptions and reductions to ease access to goods as well as promote trade and production in the country.

Analysts view the move as beneficial to producers and business owners since prices for commodities remain high. Burundi budget reading has not yet been aligned with the EAC members countries arrangement.

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