After sparing boda boda operators, infant flour and bread from new taxes, a parliamentary committee has proposed increases in other taxes that will raise the cost of airtime and internet data services.
The taxman will raid internet service providers and mobile phone companies for additional taxes, under amendments to the Finance Bill 2021 by the National Assembly’s Finance and National Planning Committee.
The proposals will increase the rate of excise duty from 15 per cent to 20 per cent on telephone and internet data services, says a report from the committee chaired by Homa Bay Woman Rep Gladys Wanga.
The committee is allowed by law to make changes to finance bills presented by the Treasury, but the changes must be adopted by the full House to take effect.
If adopted as proposed, Kenyans should expect an increase in internet fees in coming days. The proposal was not initially included in the Finance Bill.
This comes as Kenyans are spending more time online and it will be a sure revenue earner for the government in the short term as it struggles to find ways of paying for the Sh3.6 trillion budget.
Kenya seems to be following in the footsteps of its neighbours in taxing internet services to plug budget holes. Data is a quick cash cow for tax collectors given that most government services such as drivers’ licences, land transfers and parking are now offered online. This will also push up the cost of airtime.
Another hidden tax proposed by the committee is an increase in the rate of excise duty on imported sugar confectionery from Sh20 to Sh35 per kilo.
Ironically, as it hiked taxes on internet services, Parliament lowered excise taxes on betting from a proposed 20 per cent to 7.5 per cent of the amount staked or wagered on gaming.
However, as they spared betting companies, lawmakers have gone after all other entities that offer rewards for any competition. The committee has proposed a 7.5 per cent tax to be charged on the total amount paid to participate in any other prize competition. Excise duty on lotteries (excluding charitable lotteries) will also be 7.5 per cent.
Initially, the Treasury had proposed a 20 per cent excise tax on betting. This is the second time in a row that lawmakers are coming to the aid of betting companies, which have been on the Treasury’s tax hit list.
“The betting sector is overburdened by different tax obligations. The government should impose administrative regulations to regulate operations in the sector rather than discourage investments in a single industry,” the report noted.
The committee also spared manufacturers of nicotine patches, proposing to reduce the excise duty on products containing nicotine from Sh5,000 to Sh1,200 per kilogramme.
It also cut excise duty on imported furniture from 35 per cent to 25 per cent. It also stopped the Treasury from increasing the time companies can keep tax records from five years to seven years.
If approved, this will give companies a major sigh of relief as they would have been forced to keep records by two more years, allowing the taxman more time for historical tax assessments.
The committee rejected new taxes on bread, flour and motorcycles, terming them essential products whose price increase would hit low-income earners hardest.
The committee also proposed to exempt from minimum tax any investor engaged in manufacturing and whose cumulative investment is at least Sh10 billion. This will see them enjoy the same treatment on minimum tax as those licensed under the special economic zones Act.
It is also good news for suppliers of disposable plastic syringes after the committee rejected a proposal to apply 16 per cent VAT on syringes. Other syringes with or without needles were also spared from the new tax.
It also rejected the Treasury proposal to bypass Parliament when making changes to the VAT Act. This will have allowed the Treasury CS to increase VAT without the approval of lawmakers.
The committee has also proposed to stop companies from deducting sea and air transport costs when computing income tax. This will see companies pay more taxes.
The Finance Bill 2021 seeks to amend several tax laws, among them the Income Tax Act, the Value Added Tax Act, the Excise Duty Act, the Tax Procedures Act, the Miscellaneous Fees and Levies Act, and the Capital Markets Act.
Also to be amended is the Insurance Act, the Kenya Revenue Authority Act, the Retirement Benefits Act and the Central Depositories Act.
The amendments also include measures on regulatory reforms, revenue administration reforms and measures to strengthen macroeconomic stability.
It will also be painful for employers who fail to remit retirement dues to pension schemes. This is after the committee proposed to empower retirement benefit schemes to appoint the Kenya Revenue Authority (KRA) to collect the dues on their behalf.
This will see KRA issue agency notices to defaulting employers and upon the expiry of the notice be allowed to attach the bank accounts of the defaulter.
“The cost of the recovery of unremitted contributions shall be borne by the defaulting employer,” the report notes.
“The amendment is to provide for collection of unremitted retirement benefits, through appointment of an agent (KRA). The appointment is to be done by the trustees of a scheme but with approval of the Retirement Benefits Authority.”
