Interest groups raise concern over Ruto's plan for new taxes
President William Ruto during the conferment of Eldoret town to City Status held at Eldoret Sports Club on August 15, 2024.
What you need to know:
- National Assembly Majority Leader Kimani Ichung’wah has moved to Parliament with new legislation.
- Treasury CS John Mbadi said the government would re-introduce some of the provisions in the rejected Bill.
The government is salvaging some provisions of the shelved Finance Bill amid questions why similar efforts are not being directed to the implementation of court-ordered tax reliefs like reduced VAT on fuel and road levy.
Tactically, perhaps wary of public backslash, the government has begun by rescuing proposals in the withdrawn Finance Bill, 2024, that are people-friendly.
However, interest groups, on the back of the President’s latest utterances, have protested more potent provisions will be inserted in upcoming legislation.
Just 14 days after President Ruto was forced to reject his controversial Finance Bill that sought to raise Sh346 billion new tax revenue, National Assembly Majority Leader Kimani Ichung’wah moved to Parliament with new legislation.
The Kikuyu MP tabled the Kenya Revenue Authority (Amendment) Bill, 2024 that seeks to give the Cabinet Secretary for the National Treasury powers to waive penalties and interest on tax agents that fail to disburse collected tax to the State’s coffers in time.
“The Cabinet Secretary may waive part of the whole of the penalty under subsection (3), where the person has transferred the funds to the Central Bank in full,” the Bill reads in part.
Interestingly, this was one of the proposals that were contained in the Bill – introduced during the third reading - that was rejected by the President following deadly youth-led protests across the country.
Read: I'll reinstate 'progressive' parts of rejected Finance Bill, 2024, says Treasury CS John Mbadi
Last week, National Treasury Cabinet Secretary John Mbadi said the government would re-introduce some of the provisions in the rejected Bill, particularly those relating to tax expenditures and the tax amnesty programme.
“I will just mention those two (reducing tax expenditures and extension of tax amnesty). But I know our team around here is working on some of those proposals that were in the Finance Bill 2024 which we can now put together and see how to take them to Parliament, not as Finance Bill but as other proposals,” said Mr Mbadi.
While Mr Mbadi said the tax proposals that will be reintroduced are largely those that will benefit taxpayers, the move could give the government an avenue to reintroduce some of the more contentious provisions that would further increase the cost of living and doing business.
Indeed, on Saturday, President Ruto did not mince words about his resolve to reintroduce the tax measures.
While on a development projects tour of Kakamega County, the President likened himself to a relentless parent who does not give up when the family experiences a stillbirth.
“Let me ask you, if you were planning to have a child (and you get a stillbirth), do you give up? Don’t you go back to try again? I have told Malulu (Malava MP Malulu Injendi) and our MPs that we will go to Parliament and plan again,” President Ruto said.
The Head of State said the rejection of the Finance Bill, 2024 jostled his plan to allocate Sh130 billion on development projects particularly building and upgrading roads.
But some stakeholders have vowed to oppose the reintroduction of some of the punitive tax measures that collapsed with the Bill.
The Electric Mobility Association of Kenya (Emak), a lobby group for electric vehicles and allied manufacturers, has said the revival of the tax proposals that targeted the sector will derail the uptake of EVs.
The Finance Bill, 2024 proposed to introduce the 16 per cent VAT on electric motorcycles, solar and lithium-ion batteries, electric buses and ended VAT exemption on equipment used for generating wind and solar power.
According to Emak President Hesborn Mose, the taxes will make EVs more expensive and derail the e-mobility momentum.
“Currently, the cost of EVs are between 10-15 per cent more expensive than ICE (Internal Combustion Engine) vehicles. If you add the proposed VAT and excise taxes, the cost of EVs will be up to 35 per cent higher than ICE vehicles,” said Mr Mose.
He added that while the sector received investment totaling $100 million (Sh13 billion) last year, increased taxation will deter from investing in the sector.
“Between 2022 and 2023, we saw a 500 per cent growth in the uptake of electric motorcycles due to incentives. Removing these incentives will reserve this growth and affect jobs across the value chain,” said Mr Mose.
The government’s push to reinstate the contentious tax measures comes at a time Kenyans are already paying more for key products, especially because State officials are refusing to comply with the law.
For instance, the government, through the Energy and Petroleum Regulatory Authority (Epra), has maintained the 16 per cent Value Added Tax (VAT) on fuel.
This is despite a Court of Appeal decision that rendered the Finance Act, 2023, which doubled VAT on the product from 8 per cent, unconstitutional.
Further, despite strong views expressed by the public against the review of the Road Maintenance Levy Fund (Imposition of Levy) Order, 2016, the government went ahead last month and increased the levy by Sh7 per litre to Sh25 up from Sh18. The courts have since suspended the additional charges.
These two charges have raised the cost of fuel for Kenyans, which has had ramifications on other costs including transportation, agriculture, power generation and manufacturing.
Kenyans should also expect higher food prices following a decision by the Agriculture and Food Authority (AFA) to go ahead to implement the introduction of a 2 per cent levy on imported food products such as maize and rice shipped into the country.
This is despite protests by traders who have opposed the move arguing that it will make the cost of doing business and therefore retail prices more expensive.
