MPs’ terminal dues, elections set to push 2022/23 budget higher – EY

NAIROBI, Kenya, March 31 – Global consulting firm, Ernst and Young (EY) has predicted that  terminal dues for the current Members of Parliament and the upcoming General elections are likely to push the 2022/23 national budget higher, 

EY Kenya has estimated the budget at Shs 3.31 trillion bringing to total the total spending for the past ten years since President Uhuru Kenyatta assumed power at Sh23.2  trillion.

National Treasury and Planning Cabinet Secretary Ukur Yatani is expected to present the 2022/23 budget statement to parliament on April 7th, 2022 two months earlier that the traditional time

Francis Kamau, EY Kenya partner, and tax leader, during a media briefing, said the upcoming election could slow down Foreign Direct Investments (FDI) as investors will adopt a wait-and-see approach as they await the outcome of the electoral process.

Increased spending, he said will also be allocated to legacy projects and the Big Four agenda, terminal dues for current legislators, loan repayments, and Government bailouts.

Several parastatals and publicly-funded universities are among the beneficiaries of the financial aid which is expected to help them stay afloat.

More funds, the firm said, will be channeled towards the stabilization of food prices which have been affected by the poor weather outlook and supply chain disruptions caused by the Ukraine-Russia war.

In order to increase financing, the firm has fronted the development of efficient and effective taxing of the informal sector which it decried has been spared from the aggressiveness of the Kenya Revenue Authority (KRA).

The country’s tax as a percentage of GDP stood at 12.1 percent in 2021.

“There has been over-reliance on the formal sector towards revenue generation and collection. With the aggressiveness of the KRA, expansion of revenue from the formal sector might soon be exhausted as the same players get reviewed and audited,” the firm said.

While KRA’s aggressiveness has led to a rise in revenue collection,  Kamau decried that it could possibly push investors away citing its recent feud with Keroche Breweries which he said might present an unwanted perception of the agency by potential investors.

The firm also urged the Government to slow its reliance on tax increases in order to finance the budget and consider lower tax rates in order to increase tax collection.

“The government should consider reducing current tax rates as a means of triggering more collection by the KRA. The reduction of taxes will introduce more Kenyans into the tax bracket and in any case, we have evidence that this is the immediate impact of such a move,” Kamau said.

EY Kenya further said that Treasury could consider scrapping some taxation measures such as advance tax, minimum tax, presumptive tax and turnover tax which it said, have failed to ‘ignite interest among the informal sector players on the importance of paying tax.”

EY projected Kenya’s National Debt as a percentage of GDP to grow to 72 percent in 2022 and 73 percent in 2023 up from 65.6 percent and 69 percent in 2020 and 2021 respectively.

On the other end, it projected that has projected that Kenya’s economy will grow by6.9percent in 2022