EconomyGainers & Losers in Ukur Yatani’s Kes 3.6 Trillion Budget

The National Treasury Cabinet Secretary Ukur Yatani while presenting FY2021/2022 budget before Parliament acknowledged prevailing revenue collection challenges owing to the effects of COVID-19.

In the coming financial year which begins on 1st July 2021,CS Yatani said the Kenya Revenue Authority (KRA) is expected to collect ordinary revenues amounting to Kes. 1.78 trillion in order to fund the Kes. 3.03 trillion budget.

National Treasury expects to generate additional Kes. 8.7 billion through custom measures agreed by East Africa Community partners states and proposed amendments in the Finance Bill 2021.

Kenya’s Treasury Budget 2021/2022. [Presented by Ukur Yattani]
Budget FY 2021/22 Gainers

CS Yatani who was cognizant of the effects coronavirus has had on overall cost of health proposed amendment to the Value Added Tax (VAT) Act, that will see medicament used in health facilities including decongestants and food supplements exempted from VAT.

“Further, I propose to provide VAT exemption to diagnostic and laboratory reagents, artificial respirators including therapeutic respiration apparatus, breathing appliances, gas masks as well as medical equipment and technologies used in the provision of medical services. It is my hope that the suppliers of these medicaments and medical equipment will reciprocate by making their prices affordable,” Treasury CS Yatani.

With new covid variant still lurking in the country, CS Ukur Yatani has eased pressure on manufacturers of pharmaceutical products who will now enjoy exemptions on inputs used in the making of medical ventilators and breathing appliances in order to boost access among patients with covid complications.

Mining and exploration firms will also enjoy VAT exemptions on VAT goods used exclusively in geothermal or oil exploration and mining prospects which the government expected to expand development in the mining and exploration sector.

“Mr. Speaker, to boost Kenya’s effort on green energy, I propose to exempt from VAT equipment for generation of solar and wind energy.”

Power producers who had signed a power purchase agreements with the government before April 2020 will also continue to enjoy VAT exemptions on taxable goods until the projects are finalized.

Real Estate Investment Trusts (REITs) Developers who transfer their developments such as affordable housing and special projects like students hostels will also qualify for VAT exemptions in order to deepen Capital Markets by encouraging investors to participate in REITs.

Manufacturers of face masks, sanitizers, ventilators and personal protective equipment will also enjoy duty-free importation on raw materials and inputs for another year to sustain the fight on COVID-19.

Parents of new born will also continue enjoy affordable baby diapers as treasury extended for another year, duty-free on inputs used to manufacture baby diapers under Duty Remission Scheme, a move also expected to boost manufacturing output.

Last year, we allowed manufacturers to access inputs for manufacture of baby diapers duty free, under Duty Remission Scheme.

Imported roofing tiles will also be accorded duty-free remission as the government seeks to support affordable housing program.

Also Read: Kenya’s Parliament Set to Review Debt Ceiling Upwards.

Budget FY 2021/22 Losers

While betting craze has been subdued by the health pandemic, treasury CS Ukur Yatani has noted the effects gambling has had on society and proposed to reintroduce excise duty on betting at the rate of 20 percent of the amount wagered.

Importers of potatoes, peas, tomatoes among others will also be required to pay a duty rate of 30% for a year in order to protect local farmers from cheap imports.

Ukur Yatani said treasury said imported iron and steel products, shall continue attracting a duty rate of 25% with the corresponding specific rates for a further one year.

Import duty on imported products for manufacture of leather and footwear products has also been retained at the rate of 25% to curb competition from cheap imports and undervaluation.

Local manufacturers of furniture have also been shielded from cheap as EAC Partner States agreed to extend the applicable import duty on furniture at the rate of 35% for a further one year.

To further fund the budget, the Digital Service Tax which is paid at the rate of 1% of gross turnover has also been extended to include income derived through internet and electronic network.

Yatani also targets to encourage non-registered persons to join the National Health Insurance Fund by amending the Income Tax Act to allow contributions to the National Health Insurance Fund qualify for tax relief at the rate of 15% of the contributed amount.

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