Relief for Kenyans as MPs reject Bill on higher taxes
Kenyans can sigh with relief after MPs rejected proposals made by the National Treasury to increase taxes on food commodities and common household goods.
The prices of maize and cassava flour, and of cooking gas, will either remain the same or go down, given the recommendations by the Finance Committee of the National Assembly.
The relief also extends to revellers as proposals to increase tax on beer, wine and gaming have been shot down.
In a report tabled by Finance Committee chairperson Gladys Wanga (Homa Bay Woman Representative), MPs noted that approving the proposals would have effectively left the common man to bear responsibility for the increased costs.
The Finance Bill contained measures to increase revenue with an intention to make an additional Sh51.6 billion to support the Budget.
But the lawmakers have rejected majority of the proposals contained in the Bill, leaving Treasury with an enormous task of looking for other ways of raising revenue.
Other items which will not be affected include soda, motorcycles for boda bodas and gaming. “The committee observes that imposing VAT on the commodities will increase the prices and we, therefore, reject the proposal and delete the amendment,” stated the committee.
On LPG, the committee noted that the price of the commodity had increased and recommended that VAT slapped on it be reduced from 16 per cent to 8 per cent.
The MPs have also rejected a proposal to charge excise duty on motorcycles, which would have seen their tax go up to Sh13,403.64 per unit, from Sh12,185.16.
The committee observed that the Excise rate of beer was increased in the Finance Act 2021 and therefore needs to give manufacturers time before another increase. The rate is to be retained at Sh121.85 per litre.
“Increasing the price of beer will encourage the consumption of illicit brews and also reduce tax collection by the Government,” the committee observed.
The MPs also felt that the Excise tax on spirits was increased in the Finance Act last year and therefore there is a need to give manufacturers time to adjust. As a result, they retained the Excise rate at Sh278.70 per litre. Similarly, the committee rejected a proposal to adjust Excise on wines and retained it at Sh208.20 per litre.
It will also be a reprieve for bottle manufacturers. The MPs rejected a proposal to impose tax on locally manufactured bottles as doing so will increase their prices and make them uncompetitive in the international market. The committee observed that there were already regulations in the gaming sector and, therefore, introducing the tax was not necessary.
On the Capital Gains Tax (CGT), the committee declined the proposal by the stakeholders to delete the clause, noting that it will have a negative impact on revenue collection.
It, however, noted that the increase from five per cent to 15 per cent was huge. The committee recommended that the rate be revised to 10 per cent.
The committee noted that job losses were imminent as local manufacturers sought to cushion themselves from increased costs of production brought about by inflational pressure on raw materials, freight costs and increased wages.
Glass manufacturers, for instance, warned in their presentation that they were likely to shut down as they would become uncompetitive.
However, users of cosmetic and beauty products will have to cough up more after the committee agreed with the proposal to slap them with Excise duty.
Jewelry users will also have to spend more after the MPs agreed with the Treasury to raise the Excise duty to 15 per cent, from 10 per cent currently.
Bottled water will see a marginal rise on duty charged, after the committee concurred with the Treasury to impose a tax rate of Sh6.60 per litre, up from Sh6.03.
Consumers of plain cigarettes without filters will feel the impact of higher taxation of Sh2,752.97 per mille, up from Sh2,523.87. The committee, however, agreed with the Treasury proposal to ease the pain of consumers of cigars, cheroots, and cigarillos — containing tobacco or tobacco substitutes — with a lower tax demand of Sh13,296.6 per kilogramme, compared with Sh13,906.04 currently.
Companies that opposed the proposals included Kenya Breweries Limited/UDV (K); Scotch Whisky Association; Pubs, Entertainment and Restaurant Association; Coca-Cola; Alcohol Beverages Association; and Kenya Wine Agencies.
Financial and tax entities, which appeared before the committee, termed the intended increase of taxes as punitive.
They included the Institute of Certified Public Accountants of Kenya, Kenya Association of Manufacturers, Westminster Consulting, East Africa Law Society, Kenya Bankers Association, PricewaterhouseCoopers Limited, Deloitte and Touche, and the Kenya Private Sector Alliance.
Others included Kenya Breweries Limited/UDV (K) Limited, The Scotch Whisky Association, Pubs, Entertainment and Restaurant Association of Kenya, Coca-Cola Beverages Africa, Alcohol Beverages Association of Kenya and Kenya Wine Agencies Limited.