What you need to know:
- From taxation, the government raised Sh395 billion in Pay As You Earn and Sh341 billion from corporate income tax.
The government’s ordinary revenue for Financial Year 2019/2020 was Sh1.893 trillion. In other words, this can be defined as the resources the government raised to finance its plans.
The least contributor to this was social security contributions at Sh557 million, while the largest was taxation, at Sh1.612 trillion.
Appropriation-in-Aid given in the form of ministerial allocation was Sh133 billion, property income the government realised was Sh128 billion and the income the government generated from the sale of goods and services was Sh17 billion.
The remaining Sh2.5 billion of the government's ordinary revenue came from fines and penalties.
From taxation, the government raised Sh395 billion in Pay As You Earn (Paye) and Sh341 billion from corporate income tax. These taxes come from profit and income, hence their classification as direct taxes as they are paid directly to the government.
Indirect taxes paid to the government are passed down to consumers when they buy goods and services. Examples of these taxes include value-added tax and excise tax, of which Sh413 billion and Sh204 billion, respectively, was raised.
Customs duty and taxes collected from imports amounted to Sh142 billion. Taxation on financial and capital transactions was Sh21 billion while taxes on annual investment allowance was Sh94 billion with the remaining Sh2 billion coming from other taxable sources.
If the government set out to increase ordinary revenue, doubling the amount of social contribution would raise only Sh1 billion. But that would be insignificant, considering the spending needs of the Sh3.632 trillion budget submitted to Parliament on April 30.
Beg for more aid
The alternative area where the government can raise revenue is to increase its income from property, beg for more aid or find ways of increasing taxes. There are a variety of taxes and these can be increased through different methods without changing their rates.
Boosting productivity will have the effect of increasing direct taxes either through Paye from increased wages or corporate income tax from increased profit.
One way of increasing productivity is by easing the means of doing business, such as reducing the Central Bank rate, which would, in effect, lead to a reduction in lending rates.
Increasing public consumption, on the other hand, will increase indirect taxes. This can be achieved by increasing economic activity by supporting e-business that require less face-to-face interaction. Making the internet cheaper would achieve that.
Douglas Mwaniki, Nairobi