On Thursday 11th June 2020, the Cabinet Secretary in charge of National Treasury, Ambassador Ukur Yatani, unveiled a Ksh2.79 trillion budget aimed at serving the country for the next financial year until June 2021. This year’s budget was unique given the circumstances surrounding its unveiling. It came at a time when the country, indeed the whole world, is battling a rare crisis, the like of which has not been witnessed by virtually all the generations alive today. The COVID-19 Pandemic, whose origin is traceable to China, has brought the world to its knees, radically upending the hitherto entrenched norms and practices. In Kenya in particular, the impact to the economy has been just as draining as it has been negatively disruptive. No facet of life has been spared the consequences: Political, economic and social. Millions have been rendered jobless, owing to the grounding of various businesses from the hospitality sector, manufacturing, education, aviation, freight & logistics, public transport just to mention a few. For majority of Kenyan’s the unveiling of the budget could not have come at a better time.
In his statement, the Cabinet Secretary read out a break-down of the allocation expected to cushion the country from the shock, while readying it for recovery from one of the worst crisis ever witnessed. Keen not to be distracted from its agenda, the government ensured allocation to the Big Four Agenda, seen as key in boosting economic growth while improving the lives of Kenyans. Manufacturing was allocated Ksh18.3 billion; Food Security Ksh52.8 billion; Universal Healthcare Ksh50.3 billion; Housing Ksh6.9 billion. Devolved units were allocated a total of Ksh369.9 billion being Ksh316.5 billion of equitable share and Ksh53.4 billion of conditional allocation. Even with the allocations and determination to achieve its targets, the government is staring at a deficit in its budget of Ksh607.8 billion.
Keen to maximize revenue collection, the government has for the first time trained its eyes on the digital space, with the introduction of 1.5% digital tax imposed upon all online transactions. It is keen to leverage the expanding online space to generate more toward meeting budgetary responsibilities. Though in itself not a bad idea, care must be taken to the introduction of such measures so that they do not in any way frustrate public’s engagement with the increasingly significant space. In any case, all practical measures should be put in place to boost its growth. As a start, the government should closely monitor the implications of the new digital tax. Flexibility should be adopted to ensure that any bits that are inimical are arrested and contained before their full consequences can grow to a destructive maturity. Secondly, care should be taken to avoid any risk of misuse and exploitation, either by online service providers or by consumers of such services. Not to be left behind is any breach to the security of such transactions. Various experiences have demonstrated that online transactions are not immune to security associated risks.
There’s no doubt that the digital space is a frontier that has for the past three months seen an increase in revenue. With uncertainty on the resumption of normalcy, it would be safe to assume that the taxman will be collecting quite a dime under this new tax given the numerous business transactions taking place as Kenyans try to reduce movement in accordance to the social distancing measures. Keeping in mind that Kenya still faces a humongous debt burden, the revenues streaming from this front might be of good use to offset these debts. But only if the monies are properly utilised and not lost in the pockets of a few as has been the norm.
It would be interesting to see if the Ksh 3.1 billion allocated to the EACC and ODPP each would be utilized in taming the corruption that has brought the country’s economy to its knees.