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

By Steve Biko Wafula / Published June 19, 2024 | 5:55 am



Finance Bill

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:

  1. 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

  1. 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.

  1. 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.

  1. 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.

  1. 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.

  1. 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.

  1. 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.

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

  1. 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.

  1. 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.

  1. 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.

  1. 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.

  1. 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.

  1. 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.

  1. 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.

  1. 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.

  1. 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.

  1. 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.

  1. 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.

  1. 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.

  1. 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

View other posts by Steve Biko Wafula


More Articles From This Author








Trending Stories










Other Related Articles










SOKO DIRECTORY & FINANCIAL GUIDE



ARCHIVES

2024
  • January 2024 (238)
  • February 2024 (227)
  • March 2024 (190)
  • April 2024 (133)
  • May 2024 (157)
  • June 2024 (145)
  • July 2024 (107)
  • 2023
  • January 2023 (182)
  • February 2023 (203)
  • March 2023 (322)
  • April 2023 (298)
  • May 2023 (268)
  • June 2023 (214)
  • July 2023 (212)
  • August 2023 (257)
  • September 2023 (237)
  • October 2023 (264)
  • November 2023 (286)
  • December 2023 (177)
  • 2022
  • January 2022 (293)
  • February 2022 (329)
  • March 2022 (358)
  • April 2022 (292)
  • May 2022 (271)
  • June 2022 (232)
  • July 2022 (278)
  • August 2022 (253)
  • September 2022 (246)
  • October 2022 (196)
  • November 2022 (232)
  • December 2022 (167)
  • 2021
  • January 2021 (182)
  • February 2021 (227)
  • March 2021 (325)
  • April 2021 (259)
  • May 2021 (285)
  • June 2021 (272)
  • July 2021 (277)
  • August 2021 (232)
  • September 2021 (271)
  • October 2021 (305)
  • November 2021 (364)
  • December 2021 (249)
  • 2020
  • January 2020 (272)
  • February 2020 (310)
  • March 2020 (390)
  • April 2020 (321)
  • May 2020 (335)
  • June 2020 (327)
  • July 2020 (333)
  • August 2020 (276)
  • September 2020 (214)
  • October 2020 (233)
  • November 2020 (242)
  • December 2020 (187)
  • 2019
  • January 2019 (251)
  • February 2019 (215)
  • March 2019 (283)
  • April 2019 (254)
  • May 2019 (269)
  • June 2019 (249)
  • July 2019 (335)
  • August 2019 (293)
  • September 2019 (306)
  • October 2019 (313)
  • November 2019 (362)
  • December 2019 (318)
  • 2018
  • January 2018 (291)
  • February 2018 (213)
  • March 2018 (275)
  • April 2018 (223)
  • May 2018 (235)
  • June 2018 (176)
  • July 2018 (256)
  • August 2018 (247)
  • September 2018 (255)
  • October 2018 (282)
  • November 2018 (282)
  • December 2018 (184)
  • 2017
  • January 2017 (183)
  • February 2017 (194)
  • March 2017 (207)
  • April 2017 (104)
  • May 2017 (169)
  • June 2017 (205)
  • July 2017 (189)
  • August 2017 (195)
  • September 2017 (186)
  • October 2017 (235)
  • November 2017 (253)
  • December 2017 (266)
  • 2016
  • January 2016 (164)
  • February 2016 (165)
  • March 2016 (189)
  • April 2016 (143)
  • May 2016 (245)
  • June 2016 (182)
  • July 2016 (271)
  • August 2016 (247)
  • September 2016 (233)
  • October 2016 (191)
  • November 2016 (243)
  • December 2016 (153)
  • 2015
  • January 2015 (1)
  • February 2015 (4)
  • March 2015 (164)
  • April 2015 (107)
  • May 2015 (116)
  • June 2015 (119)
  • July 2015 (145)
  • August 2015 (157)
  • September 2015 (186)
  • October 2015 (169)
  • November 2015 (173)
  • December 2015 (205)
  • 2014
  • March 2014 (2)
  • 2013
  • March 2013 (10)
  • June 2013 (1)
  • 2012
  • March 2012 (7)
  • April 2012 (15)
  • May 2012 (1)
  • July 2012 (1)
  • August 2012 (4)
  • October 2012 (2)
  • November 2012 (2)
  • December 2012 (1)
  • 2011
    2010
    2009
    2008
    2007
    2006
    2005
    2004
    2003
    2002
    2001
    2000
    1999
    1998
    1997
    1996
    1995
    1994
    1993
    1992
    1991
    1990
    1989
    1988
    1987
    1986
    1985
    1984
    1983
    1982
    1981
    1980
    1979
    1978
    1977
    1976
    1975
    1974
    1973
    1972
    1971
    1970
    1969
    1968
    1967
    1966
    1965
    1964
    1963
    1962
    1961
    1960
    1959
    1958
    1957
    1956
    1955
    1954
    1953
    1952
    1951
    1950