The Private sector is expected to benefit from the proposed reforms in the finance bill that will see the repeal of the lending rate cap. The Finance Minister Henry Rotich said that the interest rate cap law was meant to bring down the cost of borrowing and increase access to loans, but it had had the opposite effect. The Finance Minister proposed the establishment of an SME Credit Guarantee Scheme to improve access to credit among small and medium-sized businesses.
The 2019/2020 Budget made significant allocations toward the ICT sector. As per the Deloitte Budget Highlights, ICT sector output increased by an average of 10.8 per cent between 2014 and 2018 mainly due to increased investments in the industry. In the coming year, KSh3.2 billion has been set aside for the Digital Literacy Program, KSh2.9 billion toward government shared services, KSh2.8 billion for Optic Fibre project, and KSh12.3 billion toward the construction of Konza Technopolies and the support infrastructure such as the Data Centre and Smart City Facilities.
Henry Rotich proposed the reduction of VAT withholding rate from 6 per cent to 2 per cent. The move is expected to reduce the accumulation of VAT refunds at the Kenya Revenue Authority and improve business activity due to the availability of funds.
In the 2019/2020 budget, locally manufactured motherboards will be exempt from paying VAT. Similarly, services offered to plastic recycling plants and supply of machinery and items used in the construction of these plants will be exempt from paying VAT.
Alcohol and Cigarettes got added 15 per cent Excise Duty while betting activities will pay 10 per cent excise duty on the staked amount. The Minister of Finance increased the capital gains tax from 5 per cent to 12.5 per cent. Deloitte budget highlights note that property transferred by corporates in the restructuring process will be exempt from the capital gain tax to allow a smooth transition for businesses. Mr Rotich said that the neighbouring countries charge as much as 20-30 per cent in capital gains tax.
