Analysts say cost of goods likely to rise after Henry Rotich’s budget

A customer shopping at a supermarklet. Analysts say there could be an increase on prices of essential commoditioes. [PHOTO: FILE/: BEVERLYNE MUSILI/STANDARD]

NAIROBI, KENYA: Analysts have hinted at a possible increase in tax for the already burdened Kenyans as the governments seek to raise the Sh1.77 trillion budget to finance development projects.

During the 2014/2015 budget reading, National Treasury Cabinet Secretary Henry Rotich did not announce any changes to the tax rates on goods as was the case before.

Though Rotich said that the only way is to widen the tax base of employees pay tax to the government, PricewaterhouseCoopers (PWC)  tax analysts argue that there is a possible increase tax on goods through Excise duty.

Part of this rests on the yet to be published Finance Bill among other pieces of legislations which are pending before the House.

“We would caution that there is still a lot of information outstanding in regard to the above will besides, Income Tax Act and other pieces of legislations that perhaps once we have an insight of them will improve and update the analysis,” noted Anne Eriksson.

No changes in excise duty and the reason is that there is an intention to publish a new Bill and this might come with changed rates upwards.

According to Steve Okello, a director at the consultancy firm, the decision not to introduce any tax rates was deliberate.

“The reason there were no changes is that there is an intention to publish a new Bill and this might come with changed rates upwards,” he said.

Senior tax partner with PWC Rajesh Shah stated that the government has given the intent of publishing the excise duty act for public comment and eventually go through the national assembly process.

“We believe that Bill will give a greater opportunity for the government to refocus and say how to tax consumption whether it would be through excise or VAT,” noted Shah.

Offer guidance

Shah noted that this is a great opportunity to dialogue on the tax reform agendas that when the duty comes out, it should be offer guidance on how to tax consumption.

While addressing the press at the Westlands office Friday, Shah argued that the easiest way to broadening the tax base is through taxing consumption and that way you look at businesses to collect tax for you.

“In terms of income tax, you are looking at both businesses and people and increasingly, the global practice is for governments to collect more revenue from consumption tax rather than income taxes,” he stated.

Analysts are also optimistic that the Kenya Revenue Authority has the capacity to raise the proposed Sh1.2 trillion to fund the proposed 1.8 trillion National budget.

Geoffrey Karuu from Ernst and Young (EY) Certified public accountants Friday told a panel of local business leaders that KRA will only raise the amount if the authority continues with the tax collection modernization programme which it initiated few years ago.