News and Analysis
November 22, 2024
Last Thursday, Treasury Cabinet Secretary Ukur Yatani presented Kenya’s Ksh3.3 trillion budget for the 2022/2023 financial year. This budget, which is President Uhuru’s last, was 136% higher than his Ksh1.4 trillion first budget when he took power in 2013.
Away from the big numbers, what does the 2022/2023 budget mean for you and millions of other Kenyans?
As always, Money Weekly looks at matters affecting your pocket, and in this week’s edition, we’ll look at the budgetary allocations and policy changes from the new budget that are relevant to you and their impact on how you earn and spend your money.
The Treasury has allocated a total of Ksh146.8 billion to the Ministry of Health. Ksh62.3 billion of this will support Universal Health Coverage (UHC), which is part of President Uhuru Kenyatta’s Big Four Agenda. The UHC scheme aims to make quality healthcare affordable and accessible to all Kenyans.
Ksh4.1 billion of the Ksh148.6 billion has been allocated to the Linda Mama Initiative, which provides free maternity health care. A further Ksh16.2 billion will go towards managing HIV/AIDS and tuberculosis cases, while Ksh5.2 billion will support immunisation and vaccination programs.
Ksh7 billion will support the treatment and management of Covid-19, while Ksh1.3 billion has been allocated to construct a Cancer Centre at the Kisii Level 5 Hospital.
Aside from the allocations, the new budget has also exempted medical supplies from Value Added Tax (VAT). These include oxygen supplied to registered hospitals, adult diapers, urine bags, colostomy and ileostomy bags, and artificial breasts. Also exempted from VAT are plants and machinery used to produce pharmaceutical products.
The allocations to the healthcare sector and the exemption of medical supplies and equipment from VAT are meant to improve the quality of healthcare in the country while at the same time making it more affordable for you.
As a show of its commitment to education, the government has allocated the lion’s share of the executive budget to the Ministry of Education. The 2022/23 budget has allocated Ksh544.4 billion to the Education sector.
Out of this, Ksh12 billion will cater for Free Primary Education, while Ksh64.4 billion will support Free Secondary Education. Meanwhile, Ksh7.96 billion will be used for the school feeding program, while Ksh5 billion will be used to waive exam fees for grade six, class 8, and Form 4 candidates.
Ksh2.5 billion has been allocated to recruit more teachers, Ksh1.2 billion for Competency-Based Curriculum (CBC) training, while the digital literacy program will receive Ksh310 million. The government has also allocated Ksh4 billion for the construction of more classrooms.
Students in institutions of higher learning also have a reason to smile as the government allocated Ksh91.2 billion to University Education, while the Higher Education Loans Board (HELB) will receive Ksh15.8 billion.
The cost of fertiliser had increased by more than 100% in the last year before Agriculture CS Peter Munya stepped in to address the issue with a fertiliser subsidy. In the new budget, the government has shown its commitment to ensuring food security by allocating Ksh2.7 billion to a fertiliser subsidy.
The fertiliser subsidy is expected to keep down the costs of agricultural inputs and increase yields for farmers, which is expected to result in lower food prices across the country over the next year.
The government has been trying to boost the local manufacturing industry over the past several years. The 2022/23 budget has maintained this commitment by exempting locally manufactured passenger vehicles from VAT.
The VAT exemption will apply to the purchase and importation of raw materials and inputs used in the manufacture of passenger motor vehicles, as well as the purchase of passenger vehicles manufactured within the country.
The move to exempt locally manufactured passenger vehicles from VAT is expected to bring down the cost of local manufacturing and make locally manufactured passenger vehicles cheaper and more attractive compared to imported units.
Under the Excise Duty Act of 2015, the Commissioner General of the Kenya Revenue Authority (KRA) is required to adjust the excise duty rates on all products to match the inflation levels. Unfortunately, this ends up making products more expensive.
In the new budget, the Treasury CS proposed giving the Commissioner General the powers to exclude certain products from this annual excise duty adjustment based on the prevailing social and economic environment. This will apply to essential products like bottled water and petroleum products.
This move will provide relief for Kenyans by protecting essential products from the price increase that comes with the annual excise duty inflationary adjustment.
To prevent local farmers from increased competition from imported eggs, the government introduced a 25% excise duty on all imported eggs last year. However, with local egg production unable to meet local demand, the move adversely affected the hatching business, which heavily relies on imported eggs.
The new budget has proposed an excise duty exemption for imported eggs, but this only applies to eggs imported for hatching by licensed hatcheries. This exemption will lower the cost of production for the hatching and poultry business, ultimately bringing down the cost of poultry products.
The 2022/23 budget has also proposed the introduction of a 15% excise duty on advertising fees for alcoholic beverages, betting, and gaming activities. By introducing the 15% excise duty, the government aims to discourage these activities, which have been associated with adverse health, economic, and social effects.
The new tax will increase the cost of doing business for companies in these industries, which are then likely to pass the costs to consumers.
The new budget has also proposed the increase of excise duty on liquid nicotine from the current Ksh1 per unit to Ksh70 per millilitre. This aims to discourage the use of electronic cigarettes and vapes, which have rapidly grown in popularity over the last couple of years, particularly among the youth.
Under the new budget, the government has proposed changes to the Insurance Regulations that will make it mandatory for all two-wheeled and three-wheeled motor vehicles that carry fare-paying passengers to insure their passengers.
The insurance will cater for the cost of treatment in case a boda boda or tuk-tuk passenger gets injured in an accident and compensation in case of death. This is a welcome move expected to make the boda boda and tuk-tuk industry safer.
CS Ukur Yatani has proposed the amendment of the Tax Appeals Tribunal Act, 2013, which deals with appeals against decisions made by the Tax Appeals Tribunal (TAT).
Under the proposed changes, anyone appealing a TAT decision will be required to deposit 50% of the disputed tax with the Central Bank of Kenya (CBK) before appealing to the High Court. If the High Court rules the matter in favour of the taxpayer, the money will be refunded within 30 days.
This amendment is bound to have enormous repercussions for taxpayers since some aggrieved taxpayers and businesses might not have the required cash flow to post such deposits, thus making it expensive for aggrieved taxpayers to get justice.
To put this into perspective, in the case of Keroche Breweries, which owed the taxman an alleged Ksh22 billion in tax revenue, the brewer would have to deposit Ksh11 billion before appealing to the High Court.
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