Treasury seeks more revenue from financial sector regulators

Economy

Treasury seeks more revenue from financial sector regulators

Friday March 15 2024

The National Treasury Principal Secretary Chris Kiptoo. FILE PHOTO | BONFACE BOGITA | NMG

The Treasury is pushing for more revenue collections from financial sector regulators to shore up the non-tax revenues whose underperformance disrupted funding of the budget for the 2022/23 fiscal year.

Sources told the Business Daily that Principal Secretary Chris Kiptoo on Tuesday held a meeting with the chief executives of the Insurance Regulatory Authority, the Capital Markets Authority and the Retirement Benefits Authority to deliberate on ways of helping the government raise more revenues.

The regulators collect billions of shillings each year in the form of levies, licence fees and fines, leaving them with substantial surpluses, which they remit to the Treasury.

The IRA, which is headed by Godfrey Kiptum, for instance, collected Sh2.3 billion in premium levy in the year to June 2022 when it was due to remit Sh1.1 billion to the Treasury.

This represents 90 percent of the Sh1.23 billion surplus recorded in the year.

The meeting came as the Treasury disclosed that the decline in transfers from ministries, departments and agencies by Sh30.74 billion affected the funding of the national budget in the 2022/23 financial year.

“We were called just to deliberate on how we can help the government raise more revenues to bridge the deficit. We were told that as State agencies we either maintain what we give to the government in the form of dividends from our surpluses or increase it but we should not reduce it,” said one of the sources.

Read: CMA up capital threshold for market intermediaries

“Transfers from MDAs decreased by Sh30,741 million resulting from the slowing activities by the State corporations and semi-autonomous government agencies and also the reduced collections by the National Treasury that affected the funding of the national budget requirements,” according to the consolidated financial statements of SCs, SAGAs and Public Funds for the financial year ended June 30 2023.

Sources privy to the meeting at the National Treasury said the government wanted a commitment from the financial sector regulators to support the government by being more efficient in their operations and cutting down on non-core expenditures in order to generate more revenue for the government.

Dr Kiptoo who was locked up in a day-long meeting on Thursday was not available for comment and he had not responded to text messages by the time of going to press.

The SCs, SAGAs and Public Funds posted a 37 percent (Sh52.74 billion) increase in surplus funds to Sh196.41 billion in the financial year ended June 2023 from Sh143.66 billion a year earlier.

The total revenues posted by these entities (SCs, SAGAs and Public Funds) increased by six percent to Sh1.44 trillion from Sh1.35 trillion.

The National Treasury usually gets returns in the form of up to 90 percent of the surplus posted by the financial sector regulators which are part of the State-owned entities.

The government is also targeting to boost non-tax revenues by introducing changes in the tax regime that allows monies collected by all MDAs and SAGAs to be paid through a single paybill account.

The National Treasury hopes to raise Sh80.93 billion through the non-tax revenues to fund part of the Sh4.28 trillion budget for the current fiscal year.

Read: CMA to drop troubled firms from Kenyan stock market

During the first six months (July-December), the government raised Sh38.67 billion in non-tax revenues, accounting for 47.8 percent of the annual budget.

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