Why Kenyans are wary of Ruto’s 2024/2025 Budget

As the government approaches the final stages of the budget process, the proposed 4 trillion shillings budget will require an expansion of the tax base to cover the expenses.

The motor vehicle tax, a contentious issue, currently stands at 2.5% of a vehicle’s value with a minimum of Kes 5,000, but no longer includes a Kes 100,000 cap.

Kenyans are uncertain whether the National Assembly Finance & Planning Committee will make changes to eliminate the cap on the motor vehicle tax proposal.

Economic analysts predict that if the tax clause is approved without modifications, more than 60% of import car businesses may face closure, leading to a significant industry downturn.

Treasury Principal Secretary Chris Kiptoo on Thursday, June 13, defended the government’s decision to impose the motor vehicle levy on vehicle owners.

Kiptoo while speaking during an interview on Citizen TV noted that faulted Kenyans of misinterpreting the motor vehicle levy.

The PS further stated that the move to impose the motor vehicle tax was aimed at raising adequate revenues to stabilise the country’s economy.

According to him, the country was grappling with a huge debt of up to Ksh11 trillion and it was time for Kenya to adjust its revenue-raising measures.

Kenyans are now left with dilemma of the future with some arguing that, Due to the high motor vehicle tax, 90% of motorists with comprehensive insurance are considering switching to third-party coverage, indicating a shift in insurance preferences.

Fuel consumption is expected to drop by over 70%, reflecting a decrease in energy usage possibly due to factors like energy-efficient practices, alternative transportation modes, or changing consumer habits.

A large majority of private motorists, around 89%, are likely to opt for public transportation over using their cars, driven by reasons such as high fuel prices, traffic congestion, and environmental concerns..

Travel is expected to be limited to essential purposes only, as Kenyans will prioritize financial safety as a response to the ongoing high taxation.

The usage of Boda Bodas, or motorcycle taxis, will see a notable increase. This rise in popularity could be attributed to their affordability, convenience, and ability to navigate through congested urban areas more efficiently than traditional modes of transportation.

Pundits argue that, The economy is projected to be negatively impacted by more than 50%, as various sectors face funding cuts.

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Kenya Kwanza government has made significant budget cuts, including a complete reduction in university funding and the removal of funding for primary and secondary schools. The total allocation for education is Sh656.6 billion, with specific allocations for different sectors within education.

In addition to education cuts, the government has also eliminated the Linda Mama healthcare program, reduced stipends for the elderly, and seen a decline in healthcare services nationwide. The health sector has been allocated Sh861.5 million for various medical cover programs and cancer management.

Sectors such as gaming and betting, insurance and motorcycle imports are set to be some of the most hit if the recommendations of the 2024/2025 budget estimates are passed.

During the presentation of the 2024/2025 budget estimates in parliament on Thursday, the Treasury Cabinet Secretary, Njuguna Ndung’u stated that the excise duty on betting and gaming sites will be increased to 20 per cent.

He further stated that the move is aimed at curbing betting among school-going children and discouraging more Kenyans from being addicted to the sites.

Another sector that will be set to lose out is the import of fully assembled motorbikes which will now attract a 10 per cent excise duty on the customs cost of the import.

Njuguna Ndung’u stated that this measure was expected to boost the growth of the Kenyan motorcycle assemblies.

Furthermore, funding for manufacturing, agriculture, and security has been reduced, raising concerns about the allocation of resources and the provision of essential services.

The government has also made changes to excise duty rates on alcoholic beverages, cigarettes, liquid nicotine, telephone, internet data services, and money transfer services.

According to the proposed tax structure wines and beers will attract Ksh 22.50 per centiliter and Ksh16 for spirits.

Another sector that will be set to lose out is the import of fully assembled motorbikes which will now attract a 10 per cent excise duty on the customs cost of the import.

Njuguna Ndung’u stated that this measure was expected to boost the growth of the Kenyan motorcycle assemblies.

However, despite the announcement from the CS, Kenyans are expected to witness more salary deductions in the coming days following the anticipated launch of the Social Health Insurance Fund (SHIF).

Registration for the new health insurance is set to commence on June 21.

Kenyans will be paying 2.75 per cent of their gross salaries so as to be covered in the new insurance scheme. Deductions will begin from July 1.