More EAC integration can shield economy
Last updated on 20 Jun 2012 00:00
The 2012/2013 Budget statement last week was more outstanding for its sheer lack of bold initiatives for turning around the economy.
More than anything, it was a Budget of containment by a Government that has generally stuck to the conservative economics preferred by the Executive.
But there was more; for the first time in Kenya’s history, the State did not have the heart to announce bold tax measures after accepting that taxpayers have been squeezed dry.
Simply put, the economy is not expanding fast enough and any increases in tax would kill businesses, increase the level of unemployment and throw more Kenyans into poverty.
While there has been plenty of hullaballoo about the Finance minister’s notice to Kenya Revenue Authority to go after defaulting landlords who collect rent but fail to pay Income Tax on it, it is easily forgotten that this is not a new policy measure.
In fact, the requirement that landlords pay tax on rent income has been in place for some time and what the minister was doing is to push for greater enforcement.
So how will the State plug the Sh250 billion hole in its Budget other than by borrowing? Days after the Budget, the shilling has faced renewed pressure ignited by expectations of the Government going on a borrowing spree, as well as several other macro economic factors.
The latest Kenya Economic Update from the World Bank, while acknowledging that the economy has more or less stabilised, points out that it is out of sync due to the rising current account deficit which could burst beyond the acceptable 15 per cent of GDP in 2012.
With the Government planning to raid the local money markets for more funds, things can only get worse. The saving grace is if the money is used to finance critical development with medium to long-term value.