Kenya anticipates strong growth as it prepares for elections
As Kenya prepares for its General Elections in August, the government has outlined its fiscal strategy with further growth expected in the economy and several changes to tax laws established to support budgetary considerations.
Africa-focused Human Capital Management (HCM) and HR specialist services provider CRS Technologies has paid close attention to the country’s Budget Speech, officially presented by Kenya Cabinet Secretary for the National Treasury Henry K. Rotich in parliament.
According to Rotich the fiscal deficit is projected to decline to 6.0 % of GDP from an estimated 9.0 % in the FY 2016/17, and global growth is projected at 3.4 % in 2017 compared with an estimate of 3.1 % in 2016.
He added that the economy grew by 5.9 %, 6.2 % and 5.7 % in the first, second and third quarters of 2016 respectively, bringing the average growth for the first three quarters to 5.9 %. It is expected to grow by another 5.9 % in 2017.
Another key takeaway is that revenue collection, including Appropriation-in-Aid (AIA), is projected at Ksh 1,704.5 billion equivalent to 19.6 % of GDP.
CRS Technologies underlines the application of proposed amendments to the Income Tax Act, and what this could mean for that local market.
Kenya’s budget confirms an expansion of PAYE tax bands by 10% and increase in personal relief by the same rate and new annual PAYE bands will come into effect from 1 January 2018.
The personal relief will be increased from KES 15,360 p.a. to KES 16,896 p.a and the tax amnesty declaration period in relation to foreign income has been extended to 30 June 2018 from 31 December 2017. KRA will issue guidelines for taking the amnesty.
“These changes to tax legislation and economic considerations are important to bear in mind, given the level of trade between South Africa and Kenya, and mutual interest in each other’s market growth and opportunities,” says Ian McAlister, General Manager of CRS Technologies.
On Workers Day, President Uhuru Kenyatta announced an 18 per cent rise in the minimum wage for workers. He further announced that up to Sh100,000 of bonuses and overtime will not be taxed to cushion Kenyans from high cost of living.
However, many Kenyans are of the opinion that this will not be implemented as this has almost become a yearly ritual and the Ministry of Labour has no capacity to enforce it. The minimum wage only applies to workers who don't belong to unions and are, therefore, not covered by collective bargaining agreements,” says McAlister.
He stresses that there is a lot that each country can learn from the other, particularly in the area of tax legislation development and labour law enforcement and application.