Public hearings kick off on Finance Bill 2024
The House Departmental Committee on Finance and National Planning has started public hearings on the Finance Bill 2024 today, setting the stage for a series of intense discussions on the proposed tax measures. The window of submitting memoranda on the Bill is also set to close today at 5:00p.
Among the prominent industry groups scheduled to present their views to the committee are the Kenya Association of Manufacturers (KAM) and the Institute of Economic Affairs. KAM has already voiced strong criticism of the Finance Bill 2024, warning that the proposed legislation could lead to a steady rise in the cost of consumer goods across various industries in the next financial year.
Kuria Kimani, the MP for Molo, chairs the committee, which will also hear from representatives of the Institute of Public Finance, the Institute of Certified Public Accountants of Kenya (ICPAK), and tax and advisory firm Deloitte & Touche.
ICPAK has called for a review of several proposals in the Bill, highlighting potential adverse effects on Kenyan consumers if the bill is passed in its current form. One of the most contentious proposals is the reclassification of ordinary bread from zero-rated to standard-rated for VAT purposes.
ICPAK argues that this change will push up the price of bread, a staple for many consumers in Kenya, further straining households already saddled by a high cost of living amid declining incomes.
The proposed bill also introduces a new motor vehicle tax of 2.5 percent of the vehicle’s value, to be collected by insurers at the point of issuing motor vehicle insurance. This tax ranges from a minimum of Kes5,000 to a maximum of Kes100,000, depending on factors such as the make, model, engine capacity, and year of manufacturer of the car.
ICPAK warns that this new tax, together with revised insurance premium rates and high fuel prices, will increase the operational costs for the transport and logistics industry. This could result in higher costs being passed on to the consumers, further worsening the cost of living.
Read also: Brace for higher prices with Finance Bill 2024
Additionally, the draft law proposes an increase in Excise Duty from 15 percent to 20 percent on telephone and internet services, fees charged for money transfer services by banks and financial institutions, and various other transactions. ICPAK notes that these new charges could see the number of transactions come down drastically, potentially contracting the collection of excise duty.
While ICPAK voiced several concerns, it has also welcomed some aspects of the bill. Positive proposals include the introduction of a minimum top-up tax to align with international tax regimes, an increase in the threshold for non-taxable benefits, and the introduction of a Significant Economic Presence Tax at an effective rate of 6 percent.
Other favourable changes include raising the Pension contribution limit and treating contributions paid for the Affordable Housing Levy and SHIF as allowable deductions.
The Finance Bill 2024, which was published on May 9, and tabled before the National Assembly on May 1, proposes several amendments to certain Acts of Parliament, including the Income Tax Act, the Value Added Tax Act 2013, and the Excise Duty Act 2015.
