Saturday, October 06, 2012
NAIROBI (Xinhua) -- The Kenyan government is seeking 165 million U.S. dollars refund from the UN for the country’s military operations inside Somalia, Finance Minister Njeru Githae said on Friday.
Githae told journalists in Nairobi that the reimbursements will constitute part of funds to finance the additional government expenditures that were not catered for at the beginning of the financial year.
"Given our multilateral operations in Somalia, I am requesting donors including the UN to fast track the refund of 164 million dollars for Kenya’s operations in Somalia," Githae said.
He noted the funds will help cover the additional wage bill of teachers, lecturers and health workers as well as other emergencies amounting to 471 million dollars for the 2012/2013 financial year.
He said additional expenditure relating to public sector wage demands alone accounted for 300 million dollars while the security interventions in Somalia and that the implementation of the constitution totaled 171 million dollars.
The ministry said it is not expecting any more demands for wage increase by public servants and that beginning July 2013, all salary adjustments will be handled by the Salary and Remuneration Commission.
"The treasury has decided to depend on expenditure cuts, new tax measures and additional administrative measures in order to bridge the fiscal balance," Githae said.
He noted the Kenya Revenue Authority’s (KRA) capacity to enforce tax laws will be stepped up in order to recoup loss in revenue in the first quarter so that collections are sustained.
"KRA has therefore been allocated an additional 17.6 million dollars for the current fiscal year in order to strengthen institutional capacity for effective tax enforcement," the senior government official said.
"The revenue collection agency will also receive 2 percent of projected revenue to be collected as agency fees up from 1.6 percent previously," he said.
The finance minister noted he has allocated an additional 5.8 million dollars to the KRA in order to increase by 41 million dollars the excise duty revenue to be collected this year.
"We shall install an online system in all factories that manufacture excisable goods in order to be able to monitor on real time basis the amount of excise duty payable instead of relying on the good will of manufacturers," he said.
This move is in addition to the decision by parliament on Thursday to introduce excise duty on fees charged by money transfer agencies, banks and cellular phone services provides.
"We don’t anticipate that the tax measure will impact the telecom sector because it is one of the fastest growing sectors of the economy and we only want to cash in from the success of the industry," he said.
He added the government will not resort to borrowing in order to ensure the country continues to live within its means, so that macro economic stability prevails in the country.
"Any move to raise the general tax rates including the income tax is likely to have a negative impact on business climate and tax compliance," he said.
He noted that as result of prudent fiscal and monetary polices, the government expects the level of inflation to drop to 5 percent by the end of next month down from 6.1 percent currently.
"The rains have come on time, so there should not be electricity rationing or food price increase which leads to inflationary pressures," he said.
The Treasury said budget execution is on course except for the slow start in the revenue collection by the KRA.
According to estimates by the ministry of finance, the government could raise an additional 94 million dollars from the surplus funds of public entities including the Central Bank of Kenya, Communication Commission of Kenya and the Retirement Benefits Authority.
Githae said the rationalization of development and recurrent expenditures and the implementation of austerity measures will add another 147 million dollars to the treasury’s kitty.
He said customs administration is being straitened and that in particular the government is revamping capability in the area of verification, valuation as well as risk profiling and risk management to ensure import duty is paid on all imports as stipulated in law.
"Kenyans will agree with me that we are yet to exploit our revenue potential.
"Many Kenyans do not pay their taxes while others are doing whatever is possible to minimize their tax liabilities," the minister said.
He said KRA’s tax ability to enforce laws will be stepped up in order to recoup loss in revenue in the first quarter and enhance revenue collection on a sustained basis going forward.
"To this end, I have enhanced funding to KRA to enable them invest in technology and skill upgrading in particular," Githae said.
He said the Treasury is proposing to imposing a 20 percent tax on the prospective industry’s proceeds from sale of property or shares, in respect of oil companies, mining firms and mineral prospecting.
"The enforcement of rental income tax is ongoing and we expect to cover major parts of Nairobi shortly.
"All landlords and tenants are urged to ensure taxes due on rental incomes are paid to KRA," Githae said.