The National Treasury has unveiled proposed amendments to tax laws that are poised to impact various sectors of the economy, sparking a new wave of public debate.
These proposals come in the wake of the highly contentious Finance Bill 2024, which was rejected earlier this year amid widespread protests, especially from younger citizens.
The proposed amendments to the Tax Laws (Amendment) Bill 2024, Tax Procedures (Amendment) Bill 2024, and the Public Finance Management (Amendment) Bill 2024 focus on raising government revenue while addressing public debt and economic recovery.
However, many of the changes are likely to fuel discontent as they mirror elements that were previously met with resistance.
The Treasury’s recent statement, intended to invite public participation outlines several key proposals that are likely to elicit strong reactions from Kenyans.
Below are some of the proposed amendments;
Introduction of a Minimum Top-Up Tax on Multinationals
The proposed amendments aim to align Kenya’s tax system with the global push for fair corporate taxation by introducing a minimum top-up tax on multinational companies.
The goal is to ensure that such entities pay a minimum effective tax rate of 15 per cent on profits generated within Kenya.
While this move targets global corporations to ensure fair tax contributions, it raises concerns about potential trickle-down effects on local industries reliant on multinational investment.
Expansion of Digital Taxation
The government seeks to broaden the scope of the "digital marketplace" definition under the Income Tax Act, extending it to include “ride-hailing services” and “delivery services.”
This would mean increased taxation on digital platforms operating in Kenya, from streaming services to e-commerce and ride-hailing services like Uber.
As digital services continue to grow in popularity and provide jobs for Kenyans, this move is likely to be unpopular, especially among tech-savvy Gen Z workers who rely on digital platforms for income.
Tightening Taxation on Employee Benefits and Pensions
The Treasury proposes stricter measures on pension contributions and employee benefits to curb tax evasion.
Contributions to registered retirement funds, pensions, and other benefits provided by employers will face additional scrutiny.
The allowable deductions for contributions to such schemes are set to be capped, which could reduce disposable income for employees and add pressure to their overall tax burden.
This particular change is likely to impact middle-income Kenyans who rely on these tax breaks to manage high living costs.
Repeal of the Affordable Housing Relief
The proposed amendments seek to repeal the Affordable Housing Relief, a tax break initially intended to make home ownership more accessible for middle- and low-income Kenyans.
Scrapping this relief would raise costs for aspiring homeowners and could be seen as another blow to the middle class.
This move comes amidst concerns that the government’s affordable housing agenda has faced delays, and many Kenyans have yet to benefit from it as intended.
Increased Tax on Imported Goods
The proposed amendments suggest an increased tax on imported goods by introducing stricter procedures under the Taxation of Export Processing Zone Enterprises.
This measure aims to promote local production by making imported goods more expensive.
However, it risks increasing the cost of consumer goods, which may affect everyday Kenyans who are already grappling with inflation and a high cost of living.
Introduction of New Definitions for Digital Services and Economic Presence
Under the proposed Tax Laws (Amendment) Bill, the Treasury seeks to classify Kenya as a "Significant Economic Presence" jurisdiction.
This redefinition is intended to enable Kenya to tax foreign digital services and online businesses operating in the country more effectively.
The government’s aim here is to capture revenue from global digital platforms like Facebook, Google, and Netflix. However, this might drive up costs for users, as companies typically pass such tax burdens onto consumers.
Background and Context: The Rejected Finance Bill 2024
These proposed amendments follow the Finance Bill 2024, which was widely opposed for its provisions on increased income taxes, a 3 per cent housing levy, and additional taxes on content creators.
Youth-led protests, primarily organized by Gen Z activists, erupted across the country, underscoring the frustrations of young Kenyans facing high unemployment and a challenging economic environment.
This rejection sent a clear message to the government that the public is unwilling to bear additional financial burdens, particularly those perceived as regressive.
Public Consultation and Next Steps
In an apparent response to the backlash, the Treasury has opened these proposals for public comment, inviting stakeholders, citizens, and advocacy groups to submit feedback before the bills are tabled in the National Assembly.
This consultative approach may provide a platform for Kenyans to influence tax policy directly, though skepticism remains over whether the feedback will lead to significant changes.
The Treasury's statement emphasizes the need for these amendments to stabilize public finances and reduce debt.
However, with public confidence at a low and economic pressure mounting, the government faces an uphill battle in convincing citizens that these changes are necessary and fair.
The coming weeks will likely see further public outcry and perhaps additional protests as Kenyans weigh in on how these tax laws will shape their financial future.
As the Treasury collects feedback, many Kenyans are watching closely, hopeful that the government will avoid a repeat of the backlash that derailed the Finance Bill 2024.
Whether the public’s input will meaningfully impact the final versions of these bills remains to be seen.
