Hon. Kimani Kuria during the finance Bill Public hearing session
The Departmental Committee on Finance and National Planning has wound up around one of the public hearings on the Finance Bill, 2023, after receiving submissions and memoranda for nine-straight days from organized groups and individuals on various proposals contained in the Bill.
This Bill comes at a time when the country is facing reduced revenues due to its debt burden, and a huge wage bill among other competing national priorities.
This Bill comes in the wake of diminishing revenues owing to the country’s debt burden, and a huge wage bill among other competing national priorities.
The Finance Bill, 2023 provides for “Ways and Means” of financing the 2023/24 Budget. Section 39 of the Public Finance Management (PFM) Act requires a balance between Budgeting and Revenue raising. This implies that should there be any reduction in the proposed tax measures, the House will also have to cut the proposed Budget proportionally.
According to the Tabled Budget Estimates, the proposed total expenditure and net lending for the FY 2023/24 is Kshs. 3,599.29 billion, representing a 6.4% (Kshs. 215 billion) expenditure increase relative to the 2022/23 Budget.
Over the last decade, the historical average annual increase in total expenditure and net lending has been about 12%. Projections show that this year, the National Treasury has maintained the Government’s fiscal consolidation efforts by limiting expenditure growth.
National Treasury statistics show that Kenya’s tax revenue collection as a share of GDP has stagnated at around 15 percent over the last decade. Consequently, Kenya has lagged behind other comparable African countries whose tax revenue collection is between 20 percent and 25 percent.
For instance, ordinary revenue as a share of gross domestic product (GDP) declined from around 16.2% in 2013/14 FY to around 15% in 2021/22 FY.
One of the drivers of the decline in ordinary revenue collection as a share of economic output was the one percentage point decline (from 7.9 percent to 6.9 percent) of income tax collection as a share of GDP.
Notably, the performance of income tax which accounts for around 46 percent of ordinary revenue collection will have a significant impact on future tax revenue prospects.
The Committee has not been shy of asserting these facts to the over 180 respondents who appeared before them to file their oral submissions.
Last week, the Committee’s Chairperson Hon. Kimani Kuria underscored the fact that the country has to grow revenues to not only seal the deficit gap but to also help fund government programs and meet other government obligations.
“We all live in this country and are aware of the dire economic situation the country is in. We all have to agree to provide solutions to our current fiscal challenges ”, the chairman told the stakeholders.
He told the stakeholders that the ripple effect that would emanate from for instance, from the proposed National Housing Development Fund is great, given the jobs that the program is set to create, and the demand for inputs the program would create for the manufacturing sector.
This provision among others that received little focus during the public hearings is however likely to be the game changer in the efforts to support the 2023/2024 budget.
After undertaking public participation in the Bill as required by law, the Departmental Committee on Finance and National Planning is now expected to engage the National Treasury and the Kenya Revenue Authority on some of the fundamental issues raised by respondents before retreating to write its report.
The Report is expected to be tabled when the House resumes from recess in early June for consideration.
