Reject new tax proposals, manufacturers urge MPs
Anti-Finance Bill, 2024 demonstrators outside Parliament yesterday. The Association of Kenyan Insurers has urged lawmakers not to pass the proposal on new taxes on electric vehicles, saying it will kill the industry.
What you need to know:
- The bill proposes 16 per cent VAT on locally assembled mobile phones, currently zero-rated.
- The organisations also opposed new taxes on electric vehicles, arguing it would kill the industry.
More than 500 organisations that have submitted views on the Finance Bill, 2024 are opposed to the introduction of taxes on bread, cooking oil, vehicles, excise duty and VAT on financial services, the eco levy and levies on electric cars.
The stakeholders who appeared before the National Assembly Finance and Planning Committee, asked lawmakers to zero-rate the products and cushion Kenyans from the high cost of living.
The organisations took issue with the 16 per cent VAT on bread and 25 per cent on crude and refined vegetable oils, saying it would push the cost of these essential commodities out of reach of ordinary families.
Appearing before the team chaired by Molo MP Kuria Kimani, the organisations demanded the rejection of the proposal to impose VAT on financial services and an increase of excise duty on the services from the current 15 to 20 per cent.
They also opposed the imposition of VAT on forex transactions, processing of cheques as well as the 10 to 20 per cent rise in the cost of M-Pesa and money transfer charges.
The industry players want the deletion of the proposal to impose an annual 2.5 per cent motor vehicle tax based on the value of the vehicle and the eco levy of Sh150 per kilogramme on articles of plastic packaging materials.
The National Treasury expects to make least Sh58 billion from the motor vehicle tax. The Finance Bill, 2024 seeks to raise Sh302 billion to finance the Sh3.9 trillion budget for 2024/25 financial year.
According to the Kenya Association of Manufacturers (KAM), the eco levy – some Sh150 per kilo of plastic packaging – would increase the prices of plastic packaging materials, batteries and hygiene products.
If the levy is passed, KAM argues, the cost of a loaf of bread will increase by Sh9 to Sh74; a litre of cooking oil by Sh16.81 to Sh316.81 while the price of a kilogramme of power detergent will go up by Sh30 to Sh230.
“If implemented as is, the bill will increase the cost of production, thereby destroying industry competitiveness, and subsequently, dent our local and export markets. It will lead to an increase in retail prices...and cash flow requirement when the environment is characterised by rising interest rates,” KAM Chief Executive Anthony Mwangi said.
“This will render local industries uncompetitive, which will push them to either downsize, move to more competitive countries or close down.”
Edible oil manufacturers said the implication of the excise duty adjustments on raw and refined vegetable oils would see the price of a 400g loaf of bread increase by Sh10.
The effects would extend to other products derived from the oils, with the price of long bar soap likely to shoot from Sh200 to ShSh350 and 250g margarine to be sold for Sh300 from Sh160.
The Association of Kenya Insurers (AKI) asked MPs to reject the car tax and the introduction of VAT on insurance services.
AKI said the 16 per cent VAT would be passed to consumers and increase premiums.
The organisations also opposed new taxes on electric vehicles, arguing it would kill the industry.
The zero rating of the supply of electric bicycles, motorcycles, cars and buses was introduced by the Finance Act, 2023 as an incentive to the growth of e-mobility and encourage the adoption of the vehicles.
Mr Hezbon Mose, the President of the Electric Mobility Association of Kenya, said withdrawing the incentive only a year after it was introduced may be premature, considering that there was a 500 per cent acceleration of the uptake the vehicles in the period of the incentive, and that investments grew significantly.
A consortium of mobile devices assemblers, including Safaricom, Airtel and Telkom, said President William Ruto’s pledge that Kenya would make handsets valued at less than $50 phone would not be realised with the imposition of VAT.
The bill proposes 16 per cent VAT on locally assembled mobile phones, currently zero-rated.
“The impact of VAT on East Africa Device Assembly Kenya Ltd (EADAK) is that it will increase the retail price of Neon Smarta to Sh8,699 from Sh7,499,” said Johnstone Kamunde, the EADAK Chief Finance Officer.
“The cost of Neon Ultra phone will rise to Sh10,439 from Sh8,999. This is a Sh1,440 rise. The 16 per cent VAT will be borne by the customer.”
