Kenyans are experiencing a growing sense of unease as they confront the potential impacts of the newly proposed Finance Bill 2024. This proposed legislation, unveiled on May 9th to the National Assembly, has ignited a firestorm of debate and concern across the nation.
The Finance Bill 2024 aims at raising Ksh 323 billion for the upcoming financial year and bringing total tax collections to Ksh 2.94 trillion. The bill proposes a range of new taxes that many perceive as a significant burden, particularly in light of recent economic hardships.
Kenyans across the board are expressing disappointment, as the bill seems to contradict promises made by the Kenya Kwanza government. The new taxes are set to impact not just major businesses and companies, but also the daily lives of ordinary Kenyans who are already struggling financially.
These struggles are further compounded by the harsh economic conditions brought on by recent heavy rains that have disrupted various sectors critical to their livelihoods.
The most immediate impact for many Kenyans will be on everyday essentials. Bread, a cornerstone of the Kenyan diet, will lose its zero-rating for VAT, potentially adding at least Ksh 10 to the cost of a standard loaf.
Using mobile money, a vital tool for financial transactions across the country, will become more expensive with a rise in excise tax from 15% to 20%. This increase extends to airtime and data, further squeezing household budgets.
Lovers of alcoholic beverages and smokers will also see a price hike as the bill proposes recalculating excise duties on alcohol based on content, likely leading to higher prices for spirits and wines, and an increase in excise duty on both unfiltered and filtered cigarettes.
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Owning a car is no longer just a transportation expense, but a yearly tax burden as well. The bill introduces a new annual Motor Vehicle Tax, calculated at 2.5% of the vehicle’s value, with a minimum of Ksh 5,000 and a maximum of a staggering Ksh 100,000.
This tax is similar to a motor vehicle tax system found in the United States and some other Western countries. The tax amount is determined by considering four factors: the vehicle’s make, model, engine capacity, and year of manufacture.
However, unlike Kenya’s proposed flat rate, the U.S. system varies by state, with the tax amount being a percentage of the vehicle’s value. Of course, one key difference between Kenya and the U.S. is the overall quality of roads – a factor that may influence how Kenyans perceive this new tax.
Higher taxes are proposed on motorcycle imports, a popular mode of transportation for many, along with increased taxes on betting, where gamblers will be required to pay Sh20 excise tax for every Sh100 staked.
An environmental levy will be slapped on commonly used goods like mobile phones, TVs, and batteries, while a new tax will target payments received from government supplies and digital marketplace earnings.
The reach of the Finance Bill 2024 extends beyond individual Kenyans. The government aims to capture a larger share of revenue from the booming digital economy and multinational corporations. Foreign digital service providers like Netflix will face a new 30% tax on their Kenyan profits, a significant bite out of their bottom line.
Large multinational corporations with resident companies in Kenya will also be subject to a minimum effective tax rate of 15%, ensuring they contribute a fair share to the Kenyan economy.
However, there are a few glimmers of hope for taxpayers. The bill proposes tax breaks for those contributing to medical funds and affordable housing initiatives, allowing these contributions to be deducted from taxable income.
Telecom operators can also claim a 10% investment deduction on the purchase of spectrum licenses, a potential benefit for the telecommunications sector.
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For exporters, the levy rate on various exported items is being reduced to a maximum of 2% of the customs value, a potential boost for Kenyan exports. However, the list of items subject to the levy has been expanded, meaning some previously exempt goods will now be taxed.
The Kenya Revenue Authority (KRA) is also set to gain more muscle under the proposed bill. They will have broader access to taxpayer data held by banks, telcos, and other entities, potentially aiding in more efficient tax collection. The bill also extends the timeframe for KRA to issue decisions on tax objection cases, giving them more time to analyze these matters.
In specific circumstances, KRA will have the power to waive the assessment or recovery of unpaid taxes, offering some relief to taxpayers in challenging situations.
The bill also proposes minor changes to tax filing and payment procedures. Weekends and public holidays will no longer be counted when calculating tax deadlines, offering taxpayers a bit more breathing room.
KRA will also have the authority to require taxpayers to integrate their systems with KRA’s for real-time document submission, potentially streamlining the tax filing process.
