From school fees to taxes and costly loans, hard times await
When schools reopen for the first term on Monday next week, parents will be forced to dig deeper into their pockets to pay school fees for their children in secondary schools after the government reinstated pre-Covid-19 fees.
The government had reduced fees for public secondary schools from Sh53,554 per year to Sh45,000 due to the shortened terms amid a crashed calendar.
The reinstatement of the pre-pandemic fees means that parents will now pay Sh8,554 more per year for their children in secondary schools.
The higher school fees add to the cost of living burden that parents will be shouldering this year.
This puts President William Ruto in a tight fix as, on the one hand, his government aims to use the new taxes that have taken effect this year to collect Sh2.035 trillion in revenues by June to fund the budget, while, at the same time, the Head of State wants to appease weary citizens burdened by high costs.
The Kenya Revenue Authority (KRA) had a shortfall of Sh19.1 billion in the first five months of the current fiscal year, which gives the government greater urgency to cut recurrent spending and implement the new tax measures.
The National Treasury collected Sh893.8 billion in total revenues between July and November last year against a target of Sh912.9 billion, marking a shortfall of Sh19.1 billion.
The major tax change that will hit investors this year is the capital gains tax (CGT). Investors are now set to be charged a 15 per cent CGT on sale of land, buildings, securities, and shares after the law that raised the CGT rate came into effect on January 1.
The Finance Act, 2022 amended the Income Tax Act by increasing the CGT rate from 5 per cent to 15 per cent in a bid to collect more revenue from asset transfers.
Analysts say the higher CGT rate may heavily affect the local investment climate at a time when the government is trying to woo investors to create jobs and grow tax revenues.
“Although the CGT rate of 15 per cent is still lower than the average rate applicable across the African continent, the increase is steep. The government could have considered a progressive increase over time,” said analysts at audit firm Deloitte.
Multinational technology firms have also issued notices to customers that they will start applying the standard 16 per cent Value Added Tax (VAT) on electronically supplied services.
Google will raise the cost of its services — including advertising — on February 1, which will make digital services more expensive. Another pain point for Kenyans is the reinstatement of charges for transferring money between bank accounts and mobile money wallets, nearly three years after they were dropped. On January 1, banks and mobile money firms reintroduced these charges after receiving regulatory approval.
The Central Bank of Kenya (CBK) had in March 2020 scrapped the charges to ease mobile payments. But, in a double blow, the resumption of these charges now come with an excise duty of 20 per cent.
Standard Chartered Bank said it would charge customers between Sh11 and Sh70 for transactions ranging between Sh101 and Sh150,000, on mobile money wallets and bank account platform.
The High Court, however, last week ordered Safaricom and CBK to halt the re-introduction of these charges pending determination of a suit involving consumer rights lobbies, handing a temporary relief to customers.
Moreover, banks have started to raise the cost of their loans after the CBK raised the base lending rates from 8.25 per cent to 8.75 per cent in November to tame inflation.
Tier-one lender NCBA, for instance, started charging higher rates on its loans on January 6. The bank raised the base lending rate for its Kenya shilling denominated loans to 11 per cent from 10 per cent and its dollar-denominated loans to 10 per cent from 9 per cent.
“Dear customer, this is to notify you of a change in our shilling and US dollar base lending rates from 10 per cent to 11 per cent per annum and 9 per cent to 10 per cent per annum respectively effective January 6, 2023,” NCBA told it customers.
Equity Bank has also announced that it’s raising interest rates from 13 per cent to 18 per cent, as it started implementing the risk-based pricing model that prices interest rates based on the risk profile of the borrower.
“The new pricing model applies to Equity Bank Reference Rate (currently 12.52 per cent), plus a margin (currently a maximum of 8.5 per cent) per annum,” the bank said.
According to the Kenya Bankers Association, about 22 of the 38 commercial banks in Kenya had received approvals to implement the risk-based pricing model by September last year, paving way for them to also raise their rates.
These come at a time inflation remains high — it stood at 9.06 per cent in December — putting President Ruto in awkward position of balancing between the short-term needs of citizens and his long-term plan of cutting the budget deficit.
The Head of State has promised to do away with all consumption subsidies that, he said, had put a major strain on government coffers, signalling more pain for consumers who had grown accustomed to subsidies specially on fuel and electricity.
All eyes are now on the CBK ahead of the bi-monthly monetary policy committee meeting later this month, where it will decide whether to adjust or retain the current base lending rate. BY DAILY NATION
Post a Comment