Members of the National Assembly are expected to take a vote on the report of the Finance Bill, 2024 this afternoon after a number of contentious proposals opposed by Kenyans were dropped.
Debate on the Second Reading of the Bill resumes this morning.
Members allied to President William Ruto lauded the move to drop some proposed taxes, while the opposition termed it as playing games to hoodwink Kenyans.
Opposition MPs yesterday thrashed the Bill and called for its total overhaul. They urged Kenyans not to be misled by the tax proposals that had been dropped, and lauded wananchi who are protesting under the banner “Occupy Parliament”.
The lawmakers warned Kenyans to expect a spike in the cost of fuel following a new proposal in the Finance Bill to increase the Road Maintenance Levy by Sh9, despite the President saying that he had listened to Kenyans' cries.
The National Assembly Finance and Planning Committee chairperson Kuria Kimani, while moving the report, urged MPs to take a bipartisan approach and adopt the proposed changes to the Bill.
While seconding the Bill, Ainamoi MP Benjamin Langat said Kenyans’ views collected during public participation sessions were included in the report.
The committee proposes a new clause 66 to increase the Road Maintenance Levy from the current Sh18 to Sh 27.
“We carefully considered the views of the public before coming up with a report. This has improved the Bill,” said Mr Kimani, who is also the Molo MP.
Leader of Majority Kimani Ichung’wah led the government side in rallying members to support the Bill, arguing that the country has to meet its tax obligations and local manufacturers have to be cushioned.
But Azimio MPs Opiyo Wandayi (Ugunja), John Mbadi (nominated), Dr Otiende Amollo (Rarieda), Millie Odhiambo (Suba North), Beatrice Elachi (Dagorreti North), and Junet Mohammed (Suna East) called on their colleagues to reject the Finance Bill in total.
Mr Mbadi castigated President Ruto’s economic advisors, accusing them of being saboteurs.
“Economic advisors hired by President Ruto are not economic advisors but saboteurs. Mr President, ask your advisors to tell you the effects of the Finance Bill 2023 on revenue collection on the Road Maintenance Levy,” said Mr Mbadi.
The Finance Bill projects to raise about Sh302 billion in additional revenue to finance the Sh3.9 trillion budget.
The National Treasury has projected that KRA will collect Sh2.95 billion in ordinary revenue and Appropriations in Aid (AiA) to finance the budget as it promises to limit enhanced borrowing from the internal and external markets.
Mr Mbadi backed up his argument by saying the revenue generated from the imposition of the Road Maintenance Levy had dipped to 8.7 percent in the current financial year compared to 14 percent recorded in the previous year.
On Tuesday, during a joint Kenya Kwanza Parliamentary Group (PG) meeting at State House, Mr Kimani announced that the government had agreed to drop some proposals in the Bill that sought to include bread on the list of VAT that is charged at 16 percent. The planned 2.5 percent motor vehicle circulation tax was also abandoned.
The committee also sought to make amendments to the Bill and delete proposals relating to the imposition of a 25 percent excise duty on crude edible and refined oils, the limitation of Eco Levy on imported products alone at the rate of Sh150 per kilogramme.
However, diapers for both children and adults and sanitary towels are some of the products that will be hit hard with the imposition of Eco levy as they are largely imported.
Further, the committee seeks a deletion from the Bill of the proposal to have financial transactions subjected to 16 percent VAT.
To recoup the revenue that the government will lose through tax concessions, the committee is proposing to increase Road Maintenance Levy by Sh9 and Import Declaration Fee from the current 2.5 percent to 3.5 percent.
“This government is giving with the right hand and taking with the left hand,” said Mr Mbadi.
The Road Maintenance Levy is charged on all petroleum fuels imported to Kenya for home use and the current levy is at the rate of Sh18 per litre of all petroleum fuels, with an anti-adulteration levy of the same amount charged on Kerosene.
The levy is then deposited into the Road Maintenance Levy Fund for annual repair and maintenance of roads under the administration of the Kenya Roads Board.
“To help raise sufficient funds to maintain and repair roads across the country, the committee recommends an increase of the levy pursuant to Section 3 of the Road Maintenance Levy Fund Act,” the committee recommends in its report.
In the 2022/23 financial year, KRA collected Sh84.14 billion but the performance of the levy in 2023/24 has been negatively affected by the demand effects of the high fuel prices and the exchange rate depreciation.
“The fall in the collections under the road maintenance levy has continued to affect the repair and maintenance of highways, urban, and rural roads,” said Mr Kuria.
The recent El Nino linked heavy rains and flooding have further worsened the extent of road destruction in the country.
The levy has not been varied since 2017 despite the increase in petroleum fuel prices per litre in Kenya over the years and the increased cost of road repair and maintenance.
The committee further recommends that the expected increase in local Appropriations-In-Aid (AIA) to the State Department for Roads may be accompanied by a reduction in net exchequer allocation to the State Department.
Mr Wandayi, the House leader of minority, wondered “who advises this government in terms of economics and finance?”
“They make mistakes one after another. Following the outcry that met the Finance Bill 2023, now an Act, I thought this government would be wiser. Looking at the report and the proposed changes it leaves a lot to be desired,” says Mr Wandayi while urging the members to reject the Bill as it is.
The leader of minority noted that the report of the committee fundamentally changes the structure of the Bill making the art of legislation a joke.
“I urge the chairman to withdraw this Bill and bring another one. Kenyans are some of the most overtaxed people in the world. Any sane government would be thinking of reducing the taxation load. The moment you increase the RML by even a shilling the ripple effect is enormous,” said Mr Wandayi.
The Ugunja MP noted that the committee’s proposed changes are a case of giving with one hand and taking with another warning that “we have seen so many investors who have shifted to neighbouring countries.”
“No sane investor will put their money in this country with these taxation measures. We have reached a situation of helplessness that is why young boys and girls are coming out to protest.”
Mavoko MP Patrick Makau raised fears about the proposal in the Bill to have Kenya Revenue Authority (KRA) unhindered access to personal data that includes financial transactions noting it's unconstitutional.
“It is high time this House stood up and said no to allowing KRA access to our financial records without a court order,” said Mr Makau.
The committee is proposing to amend section 51 of the Data Protection Act, which outlines the circumstances under which exemptions might apply.
Section 60 of the Tax Procedures Act empowers the commissioner or an authorized officer with a warrant to have full access to any data for the purposes of administering a tax law.
“Those entrusted with drafting this Bill have no good intentions for this government. They want it down,” said Mr Junet.
He added; “if we pass this Bill with its punitive proposals, it’s us who will be responsible for taxing Kenyans, not the ones who drafted it.”
“This is the chance to stand for Kenyans against punitive taxation. Higher taxation does not lead to high revenues.”
On the Export Investment Promotion Levy, the committee observes that there is a consistent trend of a decline in exports from the Country and a significant rise in imports even for goods manufactured locally.
The committee notes that the objective of the Export Investment Promotion Levy is to protect the local manufacturing sector from unfair trade practices, increase the competitiveness of Kenya’s Manufacturing sector and foster a sustainable and inclusive export sector.
