 |
| Imported Vehicles at the Port of Mombasa |
Kenyans will have to tighten their belts even more following the gazettement of the Finance Bill 2024.
The 135 page document has proposed a raft of measures geared towards broadening the tax base and raising the revenue to meet the Governments plans in the next financial year of 2024/2025.
Among the proposed area that has elicited mixed reactions both on and offline is the 16 per cent VAT on bread, with 400g loaf set to rise by at least Ksh10 under the new law.
Treasury has proposed the removal of ordinary bread from the list of zero-rated supplies, a VAT exemption list.
Others who will feel the pinch of the new law are Vehicle owners who will start paying an annual tax of up to Ksh100,000 depending on the value of their cars if Parliament endorses the proposal that is set to increase motoring costs amidst the costly fuel and spare parts.
The Bill proposed the introduction of a 2.5 per cent annual tax on the value of vehicles, with the deduction set at a minimum of Ksh5,000 and a maximum of Ksh100,000.
The deduction, called motor vehicle tax, will be paid on each vehicle at the time of issuing an insurance cover.
Moreover Imported motorcycles costing Ksh130,000 and above are set to become more expensive after the Treasury proposed to raise excise duty on a two-tier system featuring the current flat rate of Ksh12,952 or a new proposed rate of 10 percent of the unit’s value.
This move, if adopted by Members of Parliament, is likely to affect most motorcycles with an engine capacity of 100cc or more and in turn push them out of the reach of many Kenyans
Elsewhere Gamblers will pay the government 20 shillings for every 100 shilling staked after the Treasury proposed to increase excise tax on betting stakes to 20 percent from the current 12.5 percent
Excise duty on fees for mobile money transfer services like M-Pesa and money transfer charges in banks, SACCOS now rises from 15 to 20 per cent, the Cost of financial services such as issuance of credit and debit cards, forex transactions and processing of cheques to attract 16 per cent VAT.
It is however a win for beer lovers as Treasury proposes to cut excise duty on a 500ml bottle of beer with 4.2 per cent alcohol content from 71shillings and 22 cent to 47shillings to 25 cent.
The push to increase VAT on essential commodities comes in the backdrop of poor revenue collection by the Kenya Revenue Authority (KRA), which has been despite recently introduced tax and administrative measures in the 2023 Finance Act whose implementation began in July last year failed to meet its target.
According to the latest figures from the exchequer, total revenue collected through nine months of the 2023/24 financial year which runs to June 30 trailed the target by Ksh270 billion as of the end of March 2024.
The poor performance by the tax collector has resulted in the National Treasury trimming both its revenue and expenditure targets including in the new 2024/25 fiscal year.
The Bill is expected to be adopted by Cabinet and tabled in Parliament for debate and approval before the end of June.