TONIGHT: Treasury CS Mbadi speaks on the re-introduction of new tax measures

welcome back you're still watching tonight and with cabinet secretary for the national treasury John B we want to have a a conversation about various measures that are being introduced or being proposed by his office but first wasi there are those that think you took advantage of the jnz sort of protest for you to be in government why are you in government you know Sam that you can ask the appointing authority what happened between the protest and your appointment I'm appoint I don't think I'm appointed just as a consequent of protest probably there could have been discussions ahead of before that but you are the appointing authority has been very clear that he wanted a broad-based government he had realized that now he needs to bring Kenyans together so the philosophy around that it is him who can respond you know my party leaders uh I'm still a member of odm has said categorically that he was approached and that to give some of his members to go to the cabinet again the two gentlemen can respond to that did you ever see this coming because the person affected here did you ever see this coming not really I think it came as a shock um there were rumors of course towards the the days Days leading to the nomination but I will tell you uh 3 months ago from today if you ever told me that I would BCS I would think it was a dream so I didn't see it coming it was a shock rumors were there towards that date but there were just rumors was I spoke to you in this same Studio on 18th of June and we were reviewing the actions that have been taken by Kenya Quan parliamentary group at state house you are with the chairperson of the finance and planning committee whom you report to in terms of parliamentary issues did you ever think at that time that you'd be part of the solution to the challenges that were being witness at the time well at that time I had no idea that I would be in government when I mean soon but again you can't rule out anything I'm a Kenyan I'm competent I'm qualified I have my credentials I wouldn't rule out anything MH yeah but as to whether I had any idea that such an appointment would come I had zero idea all right and let's talk about because I think it's just towards the end of last week you spoke to Emanuel top Citizen t said that there are measures that you're considering to bring to Parliament some is it 47 or 49 Clauses why do you want to bring back ecoy that was rejected by Kenyans I I think let me be clear Eco Le is not one of the things that we are considering to bring for your information some I think um the way uh the whole uh the whole thing was reported I only asked a question because Emmanuel was asking me that e is contentious that multinationals actually use the word multinationals are complaining so I asked why are they complaining because I wanted to understand why they problem with eevy you know there are people who have argued that EOL is desirable or needs to be brought because of environmental issues so I just asked a question I didn't say it is one of the uh Clauses that are considered y but let me be very clear and categorical because I don't want to appear like among big was on these things first we are not bringing back uh finance bill 2024 mhm that should go out very clearly it's dead it's buried it is withdrawn there was so many Clauses in that bill that were offensive Kenyans rejected them and therefore there is no there have no space under my regime as um cabinet secretary in charge of national Treasury and economic planning I have made it very clear to the president uh that that will not cannot uh be brought under uh my leadership as a Cabinet secretary we have issues of echo Levy we have left it out because I mean we are not considering it because one there there any issue that was contentious we want to put those to AB bance even if they will come they will come later not uh as at this point in time we have issues with the vehicle circulation motor vehicle circulation issues with taxing bread issues of sanitary p issues like Financial transactions um issues like money transfers all those we have said anything that Kenyans had issues with and felt that was oppressive to them right are out of the table so so what are you considering to bring back but I would tell you yeah that there are so many Provisions in that bill that really were not contentious some of them very Progressive some we what I'm uh um I'm as the cabinet secretary in charge of National Security saying that legislation is continuous I understand Kenyans perfectly well that you know if for example today some you're walking and then you're beaten by a snake anytime you you pass there and even a grass touches your your your your foot your feet you would jump so Kenyans are so fearful that when they hear that there are some tax measures they get afraid but I will tell you this that what I think we need to emphasize on is that legislations will be there we cannot say that hence forth we are not going to bring any legislations even today legislations go to Parliament right what we must emphasize and push and which I will push is public participation public engagement explain things let people understand let them comment if it is bad take it off if it is good Let It proceed and that is what what are you considering bring him back many things not not bringing back a search but what I'm saying that there are Provisions in that bill which were Progressive for example Sam I would ask why would one reject amendment to exercise duty to increase excess Duty on imported sugar from 5 shillings to 7 to 7.5 Shillings per kilogram to protect our sugar industry why would one reject that just because it was in the finance bill of 2024 those are progressive provis in the law why would one re doesn't that make sugar more expensive for consumers imported sugar I know but but we are protect just a minute we are promoting our local industry uhuh today I hear and the statistic will come out that because of some of the intervention in the sugar industry the production of sugar locally has gone up and one of the reasons why our sugar Industries are dying why we have to buy sugar sometimes expensively import sugar from outside is because we have not protected that industry sufficiently enough so any initiative to support and um and promote that industry should be our priority create more jobs you know a your predecessor when he stood before parliament in the year 2023 Jun said that the levy of 5 Shillings per kilo on imported sugar was being introduced because of cases of diabetes has reasoning changed now to protectionism that was him if I said because of diabetes we we we doing that I'm citing the statement of this is another regime to ask me what I have said that's interesting but what I'm asking is your predecessor who held the office you hold today say the reason was diabetes you hear saying that you increasing from 5 shillings to 7.5 Shillings per kilo because you want to protect the local industry so I am responsible for what I'm saying we want to protect our sugar industry that's why we are revamping them I don't want son sugar to go down I want mum sugar to be revived I want J sugar to function M and all the rest okay so for me it is important that we protect our local manufacturing sector because one of the reasons why the Young Generation are going to the street because they don't have jobs jobs can only be uh in created in manufacturing industry so agriculture should support job creation that why we must produce more sugar can okay to produce on that particular day 18th of June yeah you said something to be about protectionism can you listen to it yes I can let's listen to what was said about protecting local Industries through taxation to me this protectionist approach is not going to be so useful for this economy I don't think there is anywhere where protecting Industries is the only way to help them make I mean competit compete or become competitive in in the market what we need to do is to look at why is it that Goods that are being manufactured here how come they cannot compete with Goods that come miles away from Kenya is because of our factors of production the factors of production in Kenya is expensive begin with energy which is the single most important input in any productive process or in any manufacturing process so that was you just over two months ago you have a different story today has not changed let me just explain to you uh some one of the reasons why our Industries are struggling is because of cost of production including the sugar industry and I will tell you one of the reasons why our sugar Industries are struggling is because look compare it to Sudan MH the nuclear of uh the factory is much much bigger in fact you would combine uh so many factories in Kenya uh to be equivalent to that so that is one the energy sector must be worked on so that the cost of production is low but again if there are some tax measures that would protect us from protect the country from becoming a Dumping Ground yeah because it is one thing to compete and it is another to dump so we don't want Kenya to be a Dumping Ground for products out there so it is important for us to look at our tax regime and some of them can help us promote our local manufacturing sector I still want to exist during my to insist during my vetting I said one way of creating jobs is to shift from looking at agriculture as an end in itself to make agriculture support system for manufacturer and that is what we are doing so I was asking another question why would one resist an amendment that would uh would increase the um give more days M for tax amnesty tax amnesty why would one just before we move to tax amnesty I I want to a little bit stick on the question of sugar because you see this is a sector that has struggled for so long yeah and I'm just wondering how does the taxing imported sugar help an industry that is not able to sustain the local demand S I wish you understood me I said the data will be out that some of the government interventions recent intervention have resulted in increased production of sugar maybe I need to get the figures but it is there it is in the government statistics and I'm looking at them right now just for information the national demand this is a sugar report um filed by the task force that was looking into it under President hu kata's regime the national demand was 1.01 metric tons the local production was 490,000 metric tons Which is less than 50% the deficit was 521 1,000 metric tons meaning much of it was imported if you to look at the current production at that time of can in the country was 4.75 million metric tons the requirement was double 9.84 million tons but the sector in the country could only produce 1.09 metric tons so you you you're looking at an industry that is already struggling to sustain the so those are statistics for which period I'm talking about the 2018 the statistics so are we in 2018 or we in 2012 in fact if you to look at the let me let me put it this way the recent interventions and I said I was very specific the recent interventions have increased production of sugar if we do much more which we are doing by the way one of the things is the reforms in the sugar sector yeah there's a problem with the bill at the Senate which I hope will be resolved quickly I don't know whether it has been pass the sugar Bill we are likely now to grow and produce more sugar which may meet our local demand what we are interested in is also to discourage The Dumping of sugar in this country cheap sugar which then kill the local production okay so those are the things that we must do I am not saying that the demand has not been has not been higher than the supply it has been we know that MH and it has been there those statistics but there is recent interventions including the privatization of the sugar Industries which we want to do so if this bill can be um dealt with and passed as is required and then other interventions are implemented then we will have a sugar industry that is thriving all right remember I also come from a sugar growing area I must protect that industry all right yes um that's that's interesting about protectionism that you spoke about but uh tell me more about the other claes that you want to bring on board no I I just mentioned that there a number of issues that we need to bring forward one is the tax amnesty yeah tax amnesty is where both parties benefit the taxpayers and the government ta what are you tar getting to raise from that well last year we raised 43 billion Shillings M this year uh this year we were targeting to raise it could be as low as 30 as high as 50 billion Shillings but the issue here is not just about raising taxes it's about compliance you see there's people who have tax arrayers and these tax arrayers have accumulated penalties and interest to the extent that they get frustrated the taxpayers one of the objectives of our tax policy is to make tax payment Humane and have taxpayers um comply so we give them opportunity uh to pay the principal tax and not to uh pay penalties and interest MH so that to me is beneficial to both sides okay it generates Revenue to the government by enhancing tax compliance and also to the taxpayers why would one object to that I will give you another one yeah pension mhm and this is not bringing money this is taking away money you see um our pension is taxable mhm but if you hit you reach the age of 65 then you don't pay tax on pension so what some Kenyans do is they once they retire at the age of they leave their pension until the 6 until the 65 years so for 5 years someone is exposed a senior citizen who has served this country for so many years MH is exposed because he's trying to be clever yeah which is not right so what we are saying is that this money uh this pension needs to be released without any tax paid on it so those were Provisions that were in the finance bill 2024 and we think some of these Provisions should be brought back all right so so when you look at it in the total of it what you're working on already how much are you targeting to raise well the figures are still not really computed because our team is still working on them but we were thinking that they could bring in 150 billion Shillings but I want to be very clear the issue here is not raising funds the issue here is making one business environment better yeah and two um take streamlining the tax policies yeah basically it's not just about raising money if we look at it as a means of raising money then we lose the point okay all right um and we'll be hoping so when do you plan to introduce that to no no we don't have timelines you know these are I said legislation some true it is continuous but there must be some timelines they looking at because well first of all we may not even bring it as one bill okay because there are some bills which maybe affect uh what I would call trade and Industry they could be brought under Trade and Industry Kenyans are obsessed with this Omnibus Bill or finance bill every year the finance bill of 2022 for failed you can't resuscitate a dead what format will these proposals take you know that is something that we have to determine and even agree with the cabinet and even have the Attorney General's input this is a work in progress there some there's someone who probably I don't know who trying to bring this as a as as as an emergency there's no emergency we have a legal framework in place to collect our taxes so there is no emergency what we are saying is that certain things that were Progressive we can we must look for a way of bringing them back in a way that would help in promoting growth and helping streamline Tax Administration and that's why we have you here to clarify some of those issues have you heard of data point data point yes what about that I'll tell you about it and um that is in regards to the situation about education in this country especially looking at the money located so we're looking at the figur so in as far as the estimates as they were before the budget cuts and the first one we are looking at um the much allocated to the education sector 656 billion Shillings is the global figure 55% of that or 358 billion Shillings goes to the teacher service commission for financing the employment of teachers their salaries as well basic education is allocated 142.2 billion Shillings higher education 128 billion Shillings and tet is allocated 30.7 billion Shillings if you to look at um the education sector at the higher level help was to receive 35.9 billion Shillings University scholarship to be allocated 16.9 billion Shillings a tiet capitation and scholarship was to take 7.7 billion Shillings beyond that for the free primary education this is a program that has existed since 2003 it was allocated 9.1 B billion Shillings for The 3 Day secondary education 61.9 billion Shillings we'll be looking at the specific allocations for lner the junior secondary schools that receive 30.7 billion Shillings and examination fees allocated at 5 billion Shillings then still in on the education sector this is the capitation parner if you in primary meaning you're benefiting from free primary education every larner is allocated 1,420 Shillings per year in the secondary school sector you receive 22,000 144 Shillings per lner for the junior secondary school they receive 15,000 Shillings per lner but there is supposed to be a schedule of how resources are released to the schools 50% should go to the schools in term 1 30% should go to the schools in term two 20% should go to the schools in term three most times School heads complain that that doesn't happen but there are other sources of financing in the education sector and that is to do the busies that are divided across different sources the the national government CDF Kitty uh you have 35 to 40% of kitties in different constituencies being allocated for busies and of course the total allocation for The Current financial year is 54.7 billion Shillings this is of course after the cuts that um implemented by Parliament then obviously we talking about if you to take this figure of 54.7 billion Shillings 40% which is an estimate would give you 21.8 billion Shillings going to the education sector specifically on buies beyond that there's more financing that comes from the national government affirmative action fund that goes through woman Representatives current total allocation for the fund is 3.3 billion Shillings a bit of it goes to financing education and then County governments as well they have busies that also go to Learners there are other scholarships by financial institutions private um and otherwise but also these are some of the questions that are emerging including what the chief justice is talking about this this evening about the situation we are in so many sources of funds distributed across the different sectors yet education is still unaffordable there's that feeling or that especially if you to look at the University funding model it sounds discriminatory how do you respond well you see in terms of that policy around University funding model I think the right person who would address that is the Ministry of Education I don't have facts about it okay personally what I know is other that now is how much we may be required to give which we did uh to fund it so as to how they get the bands from band one to band five that is an operational issue that's administrative uh to me you could uh invite here uh the uh the relevant officers of government right to deal with that I may not be competent to that and and since you've been there well it's a short time of two weeks but then again if you look at the shed of releasing resources 50 30 20 to the schools capitation what have you seen what is the challenge that schools are not able to receive resources at the right time and how do you plan to correct it you know the the resources that you'd be talking about is now for the term three mhm and that is what I would answer if there's but there's already a backlog for the previous years I I really don't think we have a backlog in the first 50 30 we uh we may be required just to release the 20% M but of course some the reason why there would be challenges of financing anything in this country is the issue of Revenue collection you can only release what you have you can not release ex Checker which you don't have can I just tell you something Sam how much did we colle collect last year as Revenue 2.4 trillion 2.4 trillion out of that if that is the money that we would collect this year out of that 1.1 would go into paying um servicing our debts mhm so that leaves you with 1.3 mhm the 1.3 uh remove let me say CFS as a whole uh debts and Constitution off his holders and pension is 1.23 so that leaves you with 1.2 salaries the wage Bill the salary the payroll be per day per per month is 7 5 billion that is 900 billion per month per year so remove that from 1.2 you remain with about 300 billion and you have recurrent expend other recurrent expenditure to the tune of 400 billion so already we have exhausted so what the solution why are we budgeting for resources you don't have solution is one we reduce our budgets our expenditure which we can only reduce to a a limit but the best solution for Kenya now if you ask me because we are not going to lay off stuff overnight to recut on the salaries of 90 billion we are not going to say we are not paying our debts we have to pay the loans so those two have to be paid recurrent expenditure you can only reduce to a limit where we have reached we have we are almost at the bare minimum so the only solution is to raise more revenue and that raising of more Revenue Kenyans and I am in that school of thought we cannot increase the rates every day we must have tax certainty tax predictability so we must at one point say we operate with the tax rates that we have now the only way to do it is therefore to to make sure that the current system is strong enough to remove leakages tax leakages to reform the Kenya Revenue Authority and that is why you can see my first assignment in that Ministry has been k k k I have had engagement with the senior management of K I had engagement with the entire staff most of them were watching me vir they contributed virtu they ideas they asked me questions I responded to them we interacted and I have followed through to see where they have reached phase one of digitization has kicked off right we must make sure that we automate Revenue collection we must make sure that staff moral is boosted we must make sure that we deal with governance issues at K we must make sure that the interaction between K and taxpayers is that of I mean of of customer uh relationship not adversarial so there are a lot of things that we must do so how much would we save by sealing the leakages we think if we we we we seal all the leakages and reform G as we would want it to perform we should not collect less than 600 billion more 600 billion because look at look at V8 some value added tax we are collecting only 3% of GDP it should be in the region of about 6% so it means means we are collecting about 50% of V8 if you walk to luuli Avenue you will be given two two prices if you're buying an electronic there you will be given two prices one for and another one if you don't want to pay tax some I'm sure you have encountered some of this look at the rental income rental income tax is another area where there is an abuse how many landlords pay tax in this country probably you you are also a landlord how much you pay so these are issues that we must seal these loopholes right and make sure that all the money that we collect come to the government to the ex cheer all right then we can address some of these problems okay all right sounds like um quite a task that you have ahead of you but we'll be getting to that conversation um as we continue with the show but first you're taking a short break here is what's coming up remember the cabinent secretary remains in studio so much to cover including the public debt question and so much more St for that [Music]