The Finance Bill 2024 Is Incoherent, Repugnant To Reason, And An Indictment Of A Government Unable To Think Beyond The Greed Of Its Officials

By Steve Biko Wafula / Published May 16, 2024 | 9:18 am




KEY POINTS

Excise Duty on Mobile Money Transfers: The excise duty on mobile money transfer fees is set to increase from 12.5% to 15%, which will make mobile money services more expensive. This is particularly impactful in Kenya, where mobile money services like M-Pesa are widely used for everyday transactions. The imposition of the new transaction charges is unnecessary taxation that will significantly reduce business.


Mr. President

The moment a leader loses his value for humanity, he loses his significance. This is the case with the current President who has become a narcissist per excellence. His leadership is transactional. No value. No empathy. No purpose. He was just addressing their insatiable and unbridled greed. I wrote about this here; https://sokodirectory.com/2023/07/rutos-leadership-style-has-given-birth-to-transactional-democracy-which-has-given-the-crime-syndicate-an-opportunity-to-govern-kenya/ and I was spot on because a year down the line, I have been vindicated.

Octavia E. Butler, in his famed Parable of the Talents, stated clearly and without any doubt that we must Choose our leaders with wisdom and forethought. That to be led by a coward is to be controlled by all that the coward fears. That to be led by a fool is to be led by the opportunists who control the fool. That to be led by a thief is to offer up your most precious treasures to be stolen. To be led by a liar is to ask to be told lies. To be led by a tyrant is to sell yourself and those you love into slavery. Octavia was simply talking about Ruto and his cabal of incompetent repugnant officials who have no empathy and common sense at all.

The tax proposals in the Finance Bill 2024 are punitive. They are evil. They are inconsiderate. They are the gateway to budgeted corruption. This morning I listened to the Chair of the Finance Committee and the MP for Molo and his reasoning was so repugnant and archaic that a child in baby class would reason better. With such leaders, who are led by greed and an insatiable appetite for power, Kenya will not be a country worth mentioning in a few months.

I want to take this opportunity to breakdown for you all the tax proposals in the Finance Bill 2024 in a fair, objective, and coherent manner so that you can see just how screwed we are with this cabal of greedy incompetent, and morally challenged politicians in Kenya Kwanza, not to mention their inability to think because of their myopic academic challenges. Indeed, we are in a quandary.

Read Also: Dear Mr. William Ruto, Si Heri Utunyonge Basi

The Tax Proposals;

The Tax Proposals in the Finance Bill 2024, Kenya are as follows;

Income Tax

  1. Increase the top personal income tax rate to 35% for income above KES 6,000,000 per year.
  2. Introduction of a 20% tax on income from digital marketplaces for non-residents and 5% for residents.
  3. Introduction of a significant economic presence tax at 30%.
  4. Minimum top-up tax for multinational groups at 15%.
  5. Taxation of income from family trusts.
  6. Taxation of repatriated income for non-residents with permanent establishments in Kenya.
  7. Digital asset tax at 3% on the transfer or exchange of digital assets.
  8. Capital gains tax on indirect transfers of shares in foreign entities.

Value-Added Tax (VAT)

  1. Increase in VAT on petroleum products from 8% to 16%.
  2. VAT on betting, gaming, and lottery services at 16%.
  3. Deletion of VAT exemptions for certain financial services (e.g., credit/debit cards, foreign exchange transactions).
  4. Exemption of LPG from VAT.
  5. VAT on compensation for loss related to taxable supplies.
  6. Increase of VAT registration threshold from KES 5 million to KES 8 million.
  7. Imposition of VAT at 16% on various goods and services, including specific tourism and healthcare construction services.

Excise Duty

  1. Excise duty on human hair, artificial nails, wigs, and false beards at 5%.
  2. Excise duty on imported mobile phones at 10%.
  3. Excise duty on imported paint and varnishes at 15%.
  4. Excise duty on imported furniture at 30%.
  5. Excise duty on alcoholic beverages, cigarettes, tobacco, and sugar-containing products.

Turnover Tax

  1. Increase in turnover tax rate from 1% to 3% for SMEs with a turnover between KES 500,000 and KES 15 million.

Other Proposals

  1. Contributions to the Social Health Insurance Fund and affordable housing levy to be tax-deductible at 2.75%
  2. Implementation of the electronic tax invoice management system (eTIMS). The cost of this will be significant for SMEs
  3. Introduction of withholding tax on payments for sales promotion, marketing, advertising services, and digital content monetization at 5%, up from 2%
  4. Re-introduction of minimum tax to curb tax evasion at 3%
  5. Development of a carbon tax framework to lower greenhouse gas emissions.
  6. Taxation framework for high-net-worth individuals.

Read Also: Let Us Allow President William Ruto To Rule For 25 Years, He Is The Savior We Need

Angry Public Response;

These proposals aim to expand the tax base and increase revenue collection to support Kenya’s ambitious budget and economic growth plans. However, there has been a serious outcry from the public on certain proposals.

Here are some of the controversial tax proposals in Kenya’s Finance Bill 2024 that have elicited significant public outcry:

  1. 16% VAT on Fuel: Increasing the VAT on petroleum products from 8% to 16% is expected to raise the cost of transportation and production, which will, in turn, increase the cost of goods and services across the board. This move has been criticized for exacerbating the already high cost of living​.
  2. Housing Levy: The introduction of a 1.5% housing levy on employees’ basic salaries, matched by employers, is intended to fund affordable housing projects. This proposal has been controversial due to its impact on take-home pay and the additional financial burden it places on both employees and employers​, not to mention that the majority of those targeted already have homes. Also the question of double taxation of say a couple in a household, will they get two houses or what will happen? The same is being imposed on Landlords, which in turn will make housing more expensive for the majority in the rental ecosystem instead of making it cheaper.
  3. Excise Duty on Mobile Money Transfers: The excise duty on mobile money transfer fees is set to increase from 12.5% to 15%, which will make mobile money services more expensive. This is particularly impactful in Kenya, where mobile money services like M-Pesa are widely used for everyday transactions. The imposition of the new transaction charges is unnecessary taxation that will significantly reduce business and as an entrepreneur and industrialist, I condemn the ‘introduction of both the Robin Tax and Robinhood Tax by removing VAT exemptions for banking transactions. If this is passed, banking services will be unaffordable to over 90% of their clients. There are concerns that the bill could devastate the banking industry, potentially leading many to revert to ‘mattress banking’. Many analysts argue that the bill would make basic banking services more expensive, increase the cost of credit, and push people toward the black market.
  4. Digital Content Tax: A 15% withholding tax on income earned from digital content creation has faced significant backlash from content creators. They argue that the tax is too high and could stifle the growth of the digital economy by making it less profitable to create content online​.
  5. Excise Duty on Imported Goods: Various excise duties have been proposed, including 10% on imported mobile phones, 15% on imported paint and varnishes, and 30% on imported furniture. These taxes are seen as detrimental to businesses and consumers who rely on these goods​.
  6. Turnover Tax Increase: The turnover tax for small and medium-sized enterprises (SMEs) with annual revenues between KES 500,000 and KES 15 million will increase from 1% to 3%. This increase has been criticized for potentially stifling small businesses, which are already struggling with high operational costs​.
  7. 20% Excise Duty on Digital Loans: The introduction of a 20% excise duty on loans from digital lenders will make these loans more expensive, affecting borrowers who rely on them for quick financial relief​ and this will force borrowers to turn to the black market and this will have a significant negative impact on the market and the overall health of the financial status that the country enjoys in the region.
  8. Access to Private Data: There is a proposal that grants the Kenya Revenue Authority (KRA) broader access to private data, which has raised privacy concerns among citizens and businesses who fear that their data might be mishandled or misused​ not to mention that this is UNCONSTITUTIONAL.
  9. 16% VAT on Bread and Milk: The proposal to introduce a 16% VAT on essential items like bread and milk has been met with substantial opposition. These items are currently zero-rated, meaning they are exempt from VAT. The new tax is expected to raise the prices of these essential goods, disproportionately affecting low-income households that rely on them​.
  10. Motor Vehicle Circulation Tax: This proposed tax will be levied annually on all motor vehicles based on engine capacity or a flat rate. The tax aims to increase government revenue but is expected to raise the cost of owning and maintaining a vehicle. This has sparked concerns among vehicle owners and the broader public due to its potential economic burden​. This is the most retrogressive proposal any government in a developing country can propose.
  11. Import Taxes on Motor Vehicles: The Finance Bill proposes higher import duties on vehicles with larger engine capacities. For example, petrol vehicles with engines exceeding 3,000 cc and diesel vehicles with engines exceeding 2,500 cc will face a 35% excise duty. This move is intended to generate additional revenue but will make importing such vehicles significantly more expensive. These proposals, along with others such as increased VAT on fuel and excise duties on various goods, have sparked widespread concern and criticism due to their potential to increase the cost of living and burden businesses and consumers alike.

Unprecedented Negative impact on the economy;

The proposed tax changes in the Finance Bill 2024 will have several significant negative impacts on Kenya’s economy:

These are;

  1. Increased Cost of Living: The removal of VAT exemptions and the introduction of new excise duties will increase the cost of basic goods and services, particularly affecting lower-income households and increasing the cost of living.
  2. Impact on Digital Economy: Higher taxes on digital assets and digital marketplace activities could discourage investment in the burgeoning digital economy, potentially stifling innovation and growth in this sector.
  3. Business Environment: The increased turnover tax and a new tax on multinational groups may create a more challenging business environment, potentially discouraging both local and foreign investments. Small and medium enterprises (SMEs), in particular, may struggle with higher tax compliance costs and reduced profit margins.
  4. Tourism and Manufacturing: The removal of VAT exemptions for certain tourism and manufacturing sector goods and services could negatively impact these industries, reducing their competitiveness and growth potential.
  5. Economic Inequality: Tax measures like the significant economic presence tax and higher personal income tax rates could exacerbate economic inequality, as they primarily target higher earners and multinational corporations, potentially leading to tax evasion and avoidance.

As people of Kenya, we have not refused to pay taxes. We will gladly pay more if we see the value of our taxes. We are paying so much in taxes, that according to reports, over 56% of our income goes to taxes alone yet despite this being the highest in any developing country, we are still forced to seek medical care, education services, private security, private transport, and rental or mortgage services on the remaining 44% of our income because the 56% we pay is stolen by these incompetent officials who come out to vomit on us on social media and floss with 10M watches as we struggle to make ends meet. The biggest concern is that our taxes are not working for us and it is time we said enough is enough.

Rejected Tax Policies;

Some countries tried to impose punitive and toxic taxes on their citizens, and it backfired. This is something that we Kenyans must raise and demand accountability and force Parliament to do its mandated duty of fighting for the interests of the people. Examples of Countries with Failed Tax Policies are;

France (Wealth Tax)

Policy: France implemented a wealth tax on net assets exceeding a certain threshold.

Outcome: The tax was largely repealed in 2018 due to its negative economic impacts. It discouraged investment and entrepreneurship, leading to capital flight as wealthy individuals moved their assets out of the country. At its peak, the wealth tax generated minimal revenue compared to its economic costs, contributing just 0.55% of total French tax revenue in 2014​ (Tax Foundation)​.

Read Also: Ruto’s Leadership Style Has Given Birth To Transactional Democracy Which Has Given The Crime Syndicate An Opportunity To Govern Kenya

Hungary (Digital Services Tax)

Policy: Hungary introduced a digital services tax aimed at taxing online advertising revenues.

Outcome: The tax faced significant pushback, particularly from the United States, which saw it as discriminatory against American companies. Hungary temporarily reduced the tax rate to 0% amid international pressures and potential retaliatory tariffs​ (Tax Foundation)​.

United Kingdom (Digital Services Tax)

Policy: The UK implemented a digital services tax on large tech companies operating within its borders.

Outcome: Similar to Hungary, the tax was criticized for targeting specific foreign companies, leading to tensions with trade partners and discussions about its sustainability and effectiveness once global tax reforms are implemented. The tax has been seen as an interim measure rather than a long-term solution​ (Tax Foundation)​.

Austria (Net Wealth Tax)

Policy: Austria had a net wealth tax which was repealed in 1994.

Outcome: The tax was criticized for its complexity and the economic distortions it caused, leading to its repeal. Despite the repeal, the tax continued to trickle in revenue for several years, indicating administrative challenges and lingering effects on the economy​ (Tax Foundation)​.

Italy (Digital Services Tax)

Policy: Italy implemented a digital services tax on revenues from digital interfaces and online advertising.

Outcome: The tax faced similar issues to those in other European countries, including international disputes and potential retaliatory measures. It was also seen as a stopgap measure pending broader international tax reforms​ (Tax Foundation)​.

These examples demonstrate the challenges and adverse outcomes that can arise from implementing certain types of tax policies, particularly those targeting digital services and wealth. They often face significant opposition, create economic distortions, and can result in capital flight or retaliatory trade measures. Not to mention that as a developing frontier market, Kenya cannot afford to mess up its economic status with incoherent tax policies that will significantly increase unemployment, chase FDI away, shut down over 53% of the current SMEs, and create a toxic political environment.

I reiterate, that as Kenyans, we have no problem paying as much taxes as possible to see our country develop, flourish, and take care of its young ones. Unfortunately, our taxes are not working for us. They are working only for the political class where they are buying watches worth KES 10M and shoes worth 3M KES yet we have no functioning healthcare systems, education services are collapsing and insecurity is on the increase.

Our incompetent politicians love to compare our developing country to developing nations that have functioning systems, where accountability is so high and corruption is not tolerated. Where hospitals work and schools churn out the best of students and where their citizens feel secure. As a country, we are far from that and it is high time we held our incompetent politicians accountable.

The Finance Bill 2024 is a tax policy bill that is incoherent, not well thought out, repugnant to the principles of sound business practices, and an affront to the opportunities for growth for the Kenyan people and therefore must be resisted in every manner in a vehement aspect across all Kenyans.

Read Also: The Finance Bill 2024: The Betrayal Of The Famed ‘HUSTLER’ Comes Full Circle, The Pain Unbridled That Is KENYA KWANZA




About Steve Biko Wafula

Steve Biko is the CEO OF Soko Directory and the founder of Hidalgo Group of Companies. Steve is currently developing his career in law, finance, entrepreneurship and digital consultancy; and has been implementing consultancy assignments for client organizations comprising of trainings besides capacity building in entrepreneurial matters.He can be reached on: +254 20 510 1124 or Email: info@sokodirectory.com

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