Kenyans warned to embrace themselves for high cost of living as government heeds to IMF's tough demands
Treasury is set to repeal the removal of tax exemptions enjoyed by key sectors of the economy.
Treasury made the commitment to the global lender in a letter of intent that spells out a raft of measures including the repealing of tax exemptions enjoyed by key sectors of the economy.
Some of the sectors to be affected include agriculture, manufacturing, education, health, tourism, finance, social work, and energy.
According to the World Bank, there are about 30 tax-exempt income categories accounting for 88 per cent of total exemptions.
The government hopes to squeeze an extra Sh40 billion in taxes from these sectors which could consequently push up the cost of goods and services currently enjoyed at a discounted level.
Treasury also expects to get an extra Sh17 billion from taxes on petroleum products. The products, which had been exempted from consumption tax, will attract 16 per cent VAT beginning September in a move aimed at complying with a deal Kenya made with IMF in 2015.Besides tax exemptions, National Treasury has assured IMF that it will either remove or modify interest rate caps and delay the implementation of some development projects as a condition to access IMF’s Sh150 billion precautionary loan.
Kenya has been granted a six-month extension on the standby arrangement to work on the IMF-driven proposals and be allowed to access the credit facility should the economy suffer an external shock.
The lender has expressed fears that should the Government not tame its appetite for debt, it would soon rise to about 60 per cent of its gross domestic product.
Kenya's public debt stands at Sh4.6 trillion up from Sh1.79 trillion in March 2013 when the Jubilee government took over power.
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