Housing levy, higher fuel costs to hit Kenyans starting July 1st
Housing levy, higher fuel costs to hit Kenyans starting July 1st
President William Ruto has assented to the Finance Bill, 2023 and the Appropriations Bill, 2023 ushering in a new age of strained household earnings as the housing levy and 16 percent VAT on fuel are expected to thrust millions of Kenyans into harder economic circumstances beginning on July 1st.
Finance Bill 2023 introduces a number of tax measures that Dr Ruto hopes will raise enough resources to finance his Kenya Kwanza administration manifesto and campaign promises such as affordable housing.
As the government increases the existing 8 percent fuel VAT to 16 percent, thousands of motorists should expect to pay more at the pump. The decision is anticipated to have an impact because transporters like matatus will charge passengers more as a result. Additionally, the cost of goods and raw materials will rise, putting more pressure on consumers from manufacturers.
"Higher cost of fuel and consequently production will result in higher price of goods in the Kenyan market and may impact the cost of living negatively and impact the government's quest to grow the economy," the Petroleum Institute of East Africa noted in its submissions to the House.
In their push to include 16 percent VAT on fuel, the National Assembly Finance and Planning committee said current VAT rate (8 Percent) "were not standard and thus intended to harmonise the rate to 16 percent including for petroleum products."
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The committee also claimed that the impact of the varying rates of VAT on fuel resulted in petroleum distributors maintaining a constant credit position, which increased government spending.
"The increase of eight percent will lead to a corresponding increase in the cost of fuel by Kes12.56 and Kes12.76 per litre for diesel and super petrol respectively," the Kenya Private Sector Alliance told the House Finance Committee.
Additionally, small businesses with incomes between Kes1 million and Kes25 million will be expected to pay three percent turnover tax, up from one percent.
Further, excise duty on imported sugar has been set at Kes5 per kilo, a move that will significantly push up the cost of the sweetener and a variety of goods that are manufactured using sugar.
Additionally, Dr. Ruto gave his approval to the Supplementary Appropriations (No. 2) Bill for 2023, which justifies the National Government's use of an additional Sh22.9 billion from the Consolidated Fund.
