Deloitte releases Kenya Budget Highlights 2023/24: Navigating Headwinds for Inclusive Growth

 Deloitte Kenya hosted a comprehensive briefing at Kempinski Hotel to analyze the Kenya Budget 2023/24, you can access the report here. The event brought together stakeholders, industry experts, and government representatives to discuss the implications of the budget on the Kenyan economy and businesses.

During the briefing, Deloitte experts shared valuable insights into the budget and its potential impact on various sectors. The experts provided in-depth analysis and highlighted both positive and negative aspects of the proposed measures.

Fredrick Omondi, Deloitte East Africa Tax and Legal Leader highlighted the risk posed by an ambitious revenue target against the current challenging economic landscape. He stated, “The government aims to collect KES 2.571 trillion in ordinary revenue, of which KES 2.4 trillion comprises tax revenue. This represents close to 20% growth from FY22/23 tax revenue projection which will be a tall order considering the economy is projected to grow by about 5%. Various tax policy and administrative measures have been put in place to boost revenue collection. While some measures address concerns raised by taxpayers, there are also significant increases in taxes and levies affecting individuals and businesses alike, which may have a counterproductive effect on the economy. It is crucial to focus on stimulating economic growth to increase tax yield without constantly raising tax rates.”

Gladys Makumi, Deloitte East Africa Financial Advisory Leader in her address, highlighted the challenges and opportunities presented by the current economic landscape in Kenya, emphasizing the importance of inclusive economic growth and fiscal discipline. She stated, “In the FY23/24 budget, the government has made some notable allocations to Kenya’s critical sectors, which include agriculture, health, education, and the digital economy. However, there is a need for the government to establish performance evaluation measures to inform the impact of these initiatives on the Kenyan economy. This will ensure that there is a positive correlation between initiatives and impact.”

Fredrick Kimotho, Deloitte East Africa Tax and Legal Senior Manager explained, “On a positive note, some of the recommendations made by the Committee are most welcome as they address some of the key concerns raised by various stakeholders during the public participation exercise. The recommendations revolve around areas such as deletion of the proposal that required taxpayers who seek to appeal against a Tax Appeals Tribunal (TAT) decision at the High Court to deposit 20% of the amount in dispute with the Commissioner, zero-rating of some key products such as fertilizer and Liquified Petroleum Gas (LPG), removal of excise duty on some of the beauty products, extension of the period within which taxpayers can carry forward restricted interest and foreign exchange losses among others.”

Mr. Kimotho further added, “On the downside, however, some of the recommendations made by the Committee would unnecessarily burden the taxpayers from an administration additional cost perspective as well increased tax burden. Such measures include but are not limited to the recommendation to revise the National Housing Development Levy by making it a tax and removing the cap that had been proposed under the Finance Bill, the higher VAT on petroleum products and the recommendation to retain the requirement of taxpayers only taking a deduction of expenses that are supported by an e-TIMs generated invoice from a business tax perspective.”

The comprehensive briefing analyzed key aspects of the budget, including measures to increase income tax collection, widen the tax base, and boost revenue through indirect taxes. The Deloitte team provided insights into the potential impact of these measures on businesses, compliance requirements, and the overall economic environment.

The event also shed light on the government’s focus on sectors such as agriculture transformation, MSMEs, housing and settlement, healthcare, digital superhighway, and the creative industry. Deloitte experts discussed the opportunities and challenges that lie ahead for these sectors and explored strategies to leverage technology and innovation for growth and inclusivity.