Total revenue in the financial year 18/19 is projected at 1.923 trillion shillings (12.85 percent on a year-on-year basis) with ordinary revenue anticipated to grow 17.04 percent year-on-year to 1.743 trillion shillings.
As per the Budget Policy Statement, the government is seeking avenues of boosting revenue mobilization which has resulted in an overhaul of the current Income Tax Act which has been in place since January 1974.
A number of measures in the proposed Income Tax Bill 2018 include:
The presumptive tax seeks to widen the tax base to the largely untapped informal sector. Income tax (at 49.41 percent in FY17/18) is the largest revenue stream. The increase in corporate tax to high-income firms is deemed regressive.
A 2017 report by the Tax Foundation indicates average corporate rate tax globally and in Africa at 22.96 percent and 28.73 percent respectively.
The proposed corporate rate tax increase will act as a disincentive in attracting foreign investment in the country. In addition, Value Added Tax (24.75 percent of FY17/18 revenue) stream is poised to increase as the proposed Tax Laws Amendment Bill 2018 seeks to move some items from zero rates to exempt.
The deficit financing in FY18/19 at 562.75 billion shillings equals 5.75 percent of projected GDP. Net domestic financing has been pegged at 276.17 billion shillings comprising 30 percent (82.85 billion shillings) through T-Bills and 70 percent (193.32 billion shillings) through T-Bonds.
The net domestic borrowing comprises 48.38 percent of the total financing, slightly higher than the 43 percent target in the Medium Term Debt Management Strategy (MTDS) for FY2018/19.
Similarly, commercial borrowing has overshoot its target (22 percent of total borrowing under the MTDS) with a level of 298.93 billion shillings (which equals 53.12 percent of total borrowing in FY2018/19).