The Finance Bill 2024, tabled before the National Assembly on 9th May 2024, proposes several key changes to the Income Tax Act, the Excise Duty Act, the Value Added Tax Act, the Tax Procedures Act, and the Miscellaneous Fees and Levies Act
This article provides a detailed breakdown of the proposed changes made, their implications, and the overall impact on various sectors.
Introduction to the Finance Bill 2024
The Finance Bill 2024 was introduced to address Kenya’s fiscal deficit and support the government’s development agenda. The bill proposes various tax reforms and policy changes to boost revenue collection and streamline tax administration.
Key Changes Proposed in the Finance Bill 2024
Value Added Tax (VAT) Adjustments
Removal of VAT on Bread: The proposed 16% VAT on bread has been removed following public outcry.
Exemption of VAT on Vegetable Oil: The initial proposal to impose a 25% excise duty on vegetable oils has been scrapped.
VAT on Sugar Cane Transportation: The proposed 16% VAT on the transportation of sugar cane has been removed.
VAT on Financial Services: The bill initially proposed increasing VAT on financial services from 15% to 40%, but this has been reversed.
Excise Duty Changes
Mobile Money Transfer Charges: The proposed increase in excise duty from 15% to 20% on mobile money transfer charges has been reversed.
Motor Vehicle Tax: The proposed motor vehicle tax, which required vehicle owners to pay 2.5% of their car value annually, has been removed.
Income Tax Adjustments
Housing Fund and Social Health Insurance Levies: These levies have been converted to tax deductibles, meaning they will not attract income tax.
Eco Levy
Eco Levy on Imported Products: The proposed Eco Levy will now only apply to imported finished products, exempting locally manufactured products.
Corporate Tax Changes
Minimum Top-Up Tax: A minimum top-up tax of 15% will be implemented, aligning with the Inclusive Framework Pillar Two proposal.
VAT Registration Threshold
Increase in Threshold: The VAT registration threshold for taxpayers making taxable supplies has been increased from KES 5 million to KES 8 million.
Kenya Revenue Authority (KRA) Decision Time Frame
Extended Time Frame: The time frame for the KRA to issue decisions has been extended from 60 to 90 days.
Implications of the Proposed Changes
1. Economic Impact
Consumer Goods: The removal of VAT on essential goods like bread and vegetable oil is expected to ease the cost of living for consumers.
Financial Services: Reversing the VAT increase on financial services will maintain the affordability of these services for businesses and individuals.
2. Business Environment
Manufacturing Sector: Exempting locally manufactured products from the Eco Levy will support the growth of the local manufacturing sector.
Automotive Industry: Removing the motor vehicle tax will alleviate the financial burden on vehicle owners and potentially boost the automotive market.
3. Revenue Collection
Tax Compliance: Increasing the VAT registration threshold is expected to simplify tax compliance for small businesses.
Corporate Tax: The introduction of the minimum top-up tax aims to ensure that multinational corporations contribute their fair share of taxes.
Conclusion
The Finance Bill 2024 introduces a range of changes aimed at improving Kenya’s fiscal health and supporting economic growth. While some proposals have been met with public resistance, the adjustments made reflect the government’s responsiveness to public concerns.
As the bill progresses through the legislative process, its final impact will depend on the implementation and enforcement of these proposed changes.
To learn more, please see the Finance Bill 2024.
Recent Developments
*On June 26, 2024, following two weeks of extensive anti-tax demonstrations in major towns and cities throughout Kenya, President William Ruto declared in a press conference the withdrawal of the contentious Finance Bill, 2024. The Bill was initially issued in the Kenya Gazette on May 9, 2024, and was approved by Parliament on June 25, 2024, amidst widespread protests nationwide.
