Social Media Activism Forces The Inept Kenya Kwanza To Amend Numerous Proposals In The Controversial Finance Bill 2024: Here Is The List

The amendments to the Finance Bill 2024, while presenting some favorable changes, fall short of addressing the core issues within Kenya’s tax regime and act as a smokescreen for the government to introduce more punitive taxes. Despite the removal of some controversial taxes like the Motor Vehicle Tax and the proposed increase in excise duty on mobile money transfers, the bill introduces or retains several other measures that disproportionately burden consumers and businesses.
For instance, the significant hike in the Road Maintenance Levy from KES 18 to KES 25 per litre will inevitably increase the cost of transportation and, consequently, the price of goods and services. Additionally, the increase in the Import Declaration Fee from 2.5% to 3.0% will raise the cost of imported goods, further straining household budgets and business expenses.
Moreover, the ambiguity around the Significant Economic Presence Tax and the introduction of withholding tax on goods supplied to public entities create uncertainty and potential compliance challenges for businesses. These measures, combined with the increased objection review period from 60 to 90 days, indicate a strategy to delay tax dispute resolutions, which could hinder business operations and economic stability.
The Finance Bill’s focus on revenue generation without adequately addressing the administrative and economic burdens reflects a short-term approach to fiscal policy. By implementing these measures, the government may be using the apparent concessions as a tactic to push through more punitive taxes under the guise of necessary reforms. This strategy not only risks economic growth but also undermines the trust and cooperation needed between the government, businesses, and the general public for sustainable development.
Read Also: The Finance Bill 2024: A Roadblock To Economic Stability And Business Growth
Here’s a detailed breakdown of the key amendments that the Finance Committee included in their report to Parliament and their implications:
- Road Maintenance Levy Increase
One of the most impactful changes is the increase in the Road Maintenance Levy by 39% from KES 18 to KES 25 per litre. This hike will directly affect fuel prices:
– Petrol:KES 189.84 to KES 196.84 per litre
– Diesel: KES 173.10 to KES 180.10 per litre
– Kerosene: KES 163.05 to KES 170.05 per litre
- Motor Vehicle Tax Removal
While the Motor Vehicle Tax has been removed, this is counterbalanced by the higher fuel levy, which will increase transportation costs for goods and services, potentially leading to higher prices for consumers.
- Early Implementation of Tax Measures
The Committee suggests moving some tax measures’ effective date from September 1st, 2024, to August 1st, 2024. This means the financial burden on consumers and businesses will occur sooner than anticipated.
- Excise Duty Act Revisions
A notable win is the rescission of the proposed repeal of Section 14 of the Excise Duty Act, which allows for offsetting excise duty on inputs and outputs. This is beneficial for manufacturers and service providers, helping to reduce operational costs.
- Import Declaration Fees Increase
The Import Declaration Fee is set to increase from 2.5% to 3.0%, raising the cost of imported goods. This change is expected to generate additional revenue but may lead to higher prices for imported products.
- VAT on Financial Services
The proposal to introduce VAT on financial services has been withdrawn, a significant win for the financial sector and consumers who rely on these services.
- Significant Economic Presence Tax
There is ambiguity regarding the Significant Economic Presence Tax. The Committee has expressed concerns about the proposed 6.0% rate, suggesting it may be too high. Potential alternatives discussed include a rate of 10.0% of deemed income or possibly 20.0%, but no final decision has been made.
- Data Protection Act Exemptions
The proposal to exempt the Kenya Revenue Authority (KRA) from the Data Protection Act’s constraints has been dropped. This is a win for taxpayer privacy, ensuring that data protection standards remain intact.
- Withholding Tax on Goods Supplied to Public Entities
The introduction of withholding tax on goods supplied to public entities has been retained, potentially increasing costs for suppliers dealing with the government.
- Objection Review Period
The Committee has proposed increasing the objection review period from 60 days to 90 days, giving the KRA more time to consider objections. This change may delay the resolution of tax disputes, which could be detrimental to businesses awaiting decisions.
- Excise Duty on Mobile Money and Internet Services
The proposal to increase excise duty on telephone, internet, and mobile money transfers from 15% to 20% has been dropped, a win for consumers and businesses dependent on these services.
- Withholding Tax on Infrastructure Bonds
Introducing withholding tax on infrastructure bonds is expected to increase the cost of government borrowing, making it a less attractive investment option.
- Capital Gains Tax on Family Trust Transfers
The proposal to impose capital gains tax on property transfers to family trusts has been withdrawn, a relief for families managing generational wealth transfers.
- VAT Apportionment Threshold Removal
The removal of the VAT apportionment threshold, coupled with challenges in the eTIMS VAT auto-population system, raises concerns about administrative complexity and compliance costs for businesses.
- Professional Services Withholding Tax Threshold
The removal of the KES 24,000 withholding tax threshold for payments such as management or professional fees is a loss, potentially increasing the tax burden and administrative challenges for professionals and small businesses.
- Excise Duty on Edible Oils
The proposed 25% excise duty on edible oils has been dropped, benefiting consumers and manufacturers by preventing an increase in food prices.
- Nut and Oil Crops Levy
The retention of the 2.0% levy on nut and oil crops continues, maintaining revenue for agricultural support but possibly impacting farmers’ profitability.
- Minimum Top-up Tax Introduction
The introduction of a minimum top-up tax is upheld, though details on its implementation remain unclear. This tax aims to ensure a minimum tax contribution from all businesses.
- Advance Pricing Agreements
The Committee’s endorsement of Advance Pricing Agreements (APAs) to manage transfer pricing issues is a positive step. Proper implementation can enhance tax compliance and reduce disputes for multinational companies.
- Summary and Implications
The Finance Bill 2024 presents a mixed bag of reforms aimed at increasing government revenue while balancing economic impacts. Key wins include the rescission of VAT on financial services and the excise duty increase on mobile money and internet services. However, higher costs from the Road Maintenance Levy, Import Declaration Fees, and withholding taxes pose challenges for consumers and businesses.
In essence, the Finance Bill 2024, despite its few favorable amendments, hides deeper financial burdens that will drastically increase the cost of living and strain our businesses. The significant hike in the Road Maintenance Levy, the increased Import Declaration Fees, and the ambiguity around new taxes signal a short-sighted and punitive approach to fiscal policy. What happened today in Nairobi is historic and we should not relent and we must demand transparency and fairness from our government or we send them home. We must consistently on a sustainable level engage in the public consultation process, voice our concerns, and ensure that our leaders are held accountable for their decisions. Our collective action is crucial for a just and equitable tax system that works for all Kenyans.
Read Also: What Will Be The Impact Of The Finance Bill 2024 On Spirits In Kenya?
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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