The 1.1 trillion budget briefly

“We contend that for a nation to try and to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle” ~ Winston Churchill


Summary of The 2011 Kenyan Budget

General provisions

Income Tax (PAYE, NSSF, NHIF)

• Salaried employees with no other sources of income

and whose employer deducts PAYE tax are no longer

required to file personal tax returns.

• Employees will be eligible for personal relief from only

one employer in cases where they have more than one

employer.

• The Commissioner granted express powers to

register taxpayers who do not to apply for Personal

Identification Number (PIN).

• Medical services or medical insurance paid by

an employer on behalf of full time employee’s

beneficiaries is now clarified as a non-taxable benefit.

Corporate Tax

• Real Estate Investment Trusts (REITs) exempt from

corporation tax and dividends paid by REITs are exempt

from withholding tax.

• Kenya Government allows organizations to enter into

Tax Information Exchange Agreements with other

countries for Transfer Pricing purposes.

• Withholding tax on management, professional or

training fee increased to 10% from 5%.

• Winnings from betting and gaming activities will attract

20% withholding tax.

• The Commissioner will prescribe how to calculate

deemed interest and this deemed interest will be

subject to withholding tax.

• Leasing of locomotives or rolling stock from nonresidents

now exempt from

withholding

tax.

Returns, records or documents required for tax

purposes shall be prepared in Kenya Shilling and

maintained in English or Kiswahili.

• Direct contributions by members of Association of

Kenya Insurers (AKI) in respect of Integrated Motor

Insurance Data Base System project exempted from

income tax until February 2012.

VAT

• Draft VAT Legislation Bill is ready and will be made

available to the public for their comments. No time

lines have been provided for the inacting of the new

VAT legislation.

Customs Duties

• Remission of import duty on aseptic plastic bags for

storing fruit extracts to 10% from 25%.

• Import duty on premixes used in the manufacture of

animal feeds has been zero rated.

• Reduction of import duty to 10% on heads used in

manufacture of sprays.

• Increase of duty on galvanized wire to 10% from 0%.

• Duty remission on inputs for production of solar panels.

• Exemption of import duty on battery operated vehicles.

• Exemption of import duty on apron buses essentially

used in airports.

• Exemption of import duty on tsetse fly traps.

• Exemption of import duty on machinery, equipment

and motor vehicles for official use by the Kenya Police.

• Exemption of duty on security equipment including

CCTVs, handheld metal detectors, bomb detectors,

walkway screening detectors and under carriage mirrors.

• Importation of rice at 35% instead of 75% for a period

of one year.

• Remission of import duty on wheat grain at 0% instead

of 10% granted last year, for a period of one year for

gazetted millers.

• Remission of import duty on maize grain at 0% instead

of 50% for a period of six months for gazetted millers.

• Reduction of import duty on food supplements from

25% to 10%.

• Zero rating of import duty on motor cycle ambulances.

Excise Duties

• Removal of excise duty on kerosene.

• Harmonization of the excise duty regime on cigarettes

at Ksh.1200 per mille or 35% of the retail selling price,

whichever is higher.

• Harmonization of excise duty regime on beer at Ksh. 70 per

litre or 40% of the retail selling price, whichever is higher.

• Excise duty on wine increased to Ksh 80 per litre or

40%, whichever is higher.

• Excise duty on Ready To Drink (RTD) beverages of

strength not exceeding 10% by volume of alcohol shall

be Ksh 70% or 40% of the retail selling price.

• The Fourth Schedule of the Customs and Excise

Regulations amended under the Provisional Collection

of Taxes and Duties Act to include a new list of

conditions to be satisfied by denaturants.

Infrastructure

• Ksh.221.4 billion for physical infrastructure – most of

these resources have been allocated towards road,

energy and transport development.

• Ksh.100.9 billion has been allocated to the Ministry of

Roads to fast track implementation of critical roads to

allow Kenyans early opportunity to use them.

• Ksh.65.7 billion has been allocated to Ministry of

Energy.

• Of this above amount, geothermal development will

receive Ksh.16.1 billion, which will be used to drill and

assess the viability of producing 140 MW.

• The Rural Electrification Programme will benefit from

Ksh.5.6 billion to facilitate supply of power from

national grid to 460 trading centres and 110 secondary

schools, among other public facilities country wide.

• Ksh.3.3 billion as mobilization fund to initiate

the implementation of a new Standard Gauge Railway

(SGR) connecting Mombasa to Kampala with a branch

line to Kisumu.

• An additional Ksh.1.9 billion toward construction of

a new branch line from Embakasi Railway Station to

Jomo Kenyatta International Airport (JKIA).

• Ksh.1 billion to initiate upgrade for the Nairobi – Ruiru

via Makadara, Dandora, Githurai and Kahawa railway

line to expand passenger services by at least ten fold.

Healthcare

• Ksh.64 billion for health services delivery plan and

restructure of the health delivery system by shifting

emphasis from curative to preventive health care.

• Ksh.903 million will be earmarked for purchase of

ARVs.

• Ksh.150 million for purchase of modern equipment

for screening cervical and breast cancer.

• Ksh.534 million allocated toward finalization of

rehabilitation of health facilities initiated under

the economic stimulus programme.

• Ksh.6.6 billion will be channelled toward enhanced

immunization coverage throughout the country.

• Continue to support expansion of voluntary health

insurance services in order to ensure more Kenyans

access health services.

Education

• Ksh.8.25 billion towards the provision of free primary

education (FPE).

• Ksh.18.5 billion for free day secondary education

(FDSE).

• Ksh.1.67 billion for free school feeding programme,

mainly in ASAL areas.

• Ksh.387.7 million for early childhood development.

• Additional Ksh.750 million for further upgrading of

National Schools.

• Ksh.680 million for purchase of computers for schools

to enhance access to quality learning materials.

• Ksh.780 million to improve infrastructure in schools

with Ksh.380 million going to construction of low cost

boarding schools in ASAL areas.

• Ksh.53.2 billion allocated to tertiary education to

further enhance access to higher education for our

children.

• Additional Ksh.840 million under the Ministry of

Education to scale up the bursary program for orphans

and children from poor households in secondary schools.

• Ksh.300 million under the Ministry of Education to

provide sanitary towels to all needy primary school

going girls.

Implementation of the New Constitution

• Ksh.20.8 billion towards the implementation of

the new constitution, which include setting up

constitutional offices; drafting of new laws; judicial

reforms, expansion of Parliament facilities, and

preparation for the next elections.

• Ksh.1.5 billion for salaries for constitutional office

holders.

• Ksh.9.3 billion for judiciary to prioritize

the implementation of the Constitution and continue

to implement strategies that will lead to reduced case

backlog, improved access to justices and modernize

the court system.

• Ksh.8.1 billion to cater for additional physical facilities

and infrastructure, including embracing ICT to fully

realize live Court hearing broadcasts, and modernization

of the existing facilities in National Assembly.

• The IIEC budget has been enhanced to Ksh.12.1 billion

to ensure smooth preparatory activities.

• Ksh.2 billion to cater for emerging requirements for

constitution-related expenditures.

Security

• Police numbers are also expected to increase with

the recent recruitment of 7,000 new officers.

• Enhanced funding for operations and maintenance by

Ksh.3.5 billion in order to improve police operations

and fight crime more swiftly.

• Security apparatus such as CCTV cameras, metal

detectors are excempted from import duty.

Financial Sector

• Reforms in the financial sector are aimed at increasing

access to financial services, greater efficiency and

improving the overall stability of the financial system.

• Continued licensing of microfinance institutions;

encouraging the Agency banking model; and reviewing

the legal, regulatory and supervisory frameworks for

the financial sector to improve them further and ensure

conformity to the new Constitution and to support

drive towards greater access to credit.

• Kenya Deposit Insurance Corporation Bill and the

National Payments System Bill shall be published shortly.

• Improving the interbank markets; increasing disclosures

of information on bank ratings, performance and

productivity; and aligning pricing of Government Bonds

to reference rates used by banks.

• Encouraging banks to share infrastructure to gain

economies of scale; and to reduce overheads through

increased use of ICT, Agency and mobile banking.

• Extending credit referencing to sharing of positive

information by banks to encourage competition for

good borrowers.

• Plan to introduce reforms to improve the legal, regulatory

and administrative processes relating to collateral.

• Pension scheme fund managers no longer restricted to

investing in guaranteed funds.

• Introduction of over the counter trading for bonds and

regulated commodities future market.

• Insurance Regulatory Authority to assume control of

a financially troubled insurer.

• Life insurance contract pricing to use Kenya mortality

experience.

Youth Employment and Engagement

• Ksh.1.6 billion for Kenya Youth Empowerment Project

(KYEP) to go towards labour-intensive works and social

services.

• Enhance the Youth Enterprise Development Fund and

the Women Enterprise Fund by Ksh.385 million and

Ksh.440 million respectively.

• Ksh. 210 million (Ksh.1 million per constituency)

towards competitive sports for youth countrywide.

Minister urges the private companies under their

Corporate Social Responsibility (CSR) budgets to match

this amount, at least on a shilling for shilling basis.

• Tax breaks for farms offering internships and training

for youth.

Agricultural & Rural Development

• Ksh.6.4 million under the Ministry of Agriculture for

provision of water in 170 constituencies.

• Ksh.1.1 billion, which translates to Ksh.30 million

per constituency for 20 water pans of 100,000 cubic

metres in all the 35 needy constituencies.

• Ksh.400 million for establishing Livestock Fund and

providing Ksh.492 million for on-going and additional

slaughter houses in ASAL areas.

• Ksh.475 million as a conditional grant under

the Ministry of Education for 1,900 schools

countrywide or Ksh.250,000 per school for 10 primary

schools per constituency covering 190 rural based

constituencies to expand access to clean drinking water

thereby improving the health of our children.

• KSh 7.3 billion for irrigation programmes covering

various parts of the country.

• KSh 2.3 billion for basic services – water/irrigation,

health, solar power, slaughterhouses – in marginalized

areas.

• Additional KSh 3.7 billion (KSh 17.8 million per

constituency) for CDF for completion of existing

projects.

• KSh 2 billion capital grants to cooperative societies to

pay coffee debts.

• KSh 4.2 billion for resettlement of IDPs (all categories).

Agriculture :For Food Security and Employment

• The International Fund for Agricultural Development

(IFAD) has extended a generous support of USD.10

million as a Risk Sharing Facility to leverage commercial

banks to lend about Ksh.10 billion to rural and

agriculture development targeting 700,000households.

• Establishing a Ksh.5 billion Impact Investment

Fund under the Kenya Incentive Based Risk Sharing

Agricultural Lending (KIRSAL) to be implemented over

a four year period in order to leverage Ksh.50 billion

lending to agricultural sector and rural development

targeting another 1.5 million smallholder farmers and

over 10,000 agribusinesses throughout the country.

• Ksh.1 billion as an initial Government contribution to

this Fund.

Miscellaneous

• KSh 2.1 billion to boost the current safety nets to

cushion the vulnerable (disabled persons, orphans,

older persons, and urban poor).

• KSh 3.3 billion (first phase) to enhance pension for retired

teachers and cushion them from rising cost of living.

• Sim card registration before activation.

East African Community

• Continue to position Kenya through appropriate

economic policy and reforms to reap the benefits from

regional integration with opportunities accorded by

EAC Common Market Protocol and the wider COMESA

market.

• Implementation of the provisions of the Common

Market Protocol and support of the ongoing

negotiations of the East African Monetary Union

Protocol to ensure that the exercise comes to a logical

conclusion for the benefit of the East African people.

(Compiled by Nikhil Hira, nhira@deloitte.co.ke)

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  1. #1 by MKiti on June 9, 2011 - 9:37 am

    ..really simple breakdown of it all. Interesting to see the allocation of money to construct water pans in some constituencies… where can a list of this be seen? Need to know if my constituency will benefit, and how I can put the managers of this fund to task in reporting.

  2. #2 by RAMADHAN ODHIAMBO on April 5, 2012 - 10:27 pm

    Thanks

  3. #3 by RAMADHAN ODHIAMBO on April 5, 2012 - 10:30 pm

    Hi

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