Accountants oppose new tax on bread, motor vehicles in Finance Bill 2024

ICPAK chairperson Philip Kakai (right) with Council members Georgina Malombe and Hesbon Omollo during the second day of the ICPAK's 41st Annual Seminar at Sarova Whitesands in Mombasa County on Wednesday 22nd May 2024. [Kelvin Karani, Standard] Accountants have opposed the move by the government to impose new tax on bread, motor vehicles, banking and insurance services. The Institute of Certified Public Accountants of Kenya (ICPAK) Wednesday said increased taxes on the products and services will only burden the already strained citizens. ICPAK chairman Philip Kakai said they are concerned about the inconsistency in the proposals contained in the Finance Bill, 2024, the national tax policy and the medium-term revenue strategy provisions that enable predictability and stability in tax laws. Addressing the press during the 41st ICPAK annual seminar in Mombasa that brought together over 3,500 accountants from East Africa, Kakai said the institute is ready and committed to support the National Assembly to enhance the scrutiny of the proposals and ensure proper implementation. "The institute has been invited and will be making detailed submissions to the National Assembly on these and other proposals on May 28, 2024," he said. The ICPAK chairman noted that the tax policy anticipated an environment where tax laws will be introduced to last for five years, yet some of the provisions introduced and passed in the Finance Act, 2023, are already being amended. "These frequent changes go against the canon of stability and predictability in taxation. Further, the Medium-Term Revenue Strategy provided a policy direction that anticipated a percentage reduction of the VAT rate," he said. Kakai said that the Finance Bill 2024 proposal to reclassify the supply of ordinary bread from zero-rated to standard-rated will increase the price of bread which is a staple food for most Kenyans. He pointed out that globally, the demand for baked products has been on the rise and the demand is even expected to grow by 13 per cent by 2025 for a variety of bakes. "The Institute says the government should retain bread and other related wheat products as zero-rated to make them affordable to the majority of Kenyans who are still grappling with the high cost of living," said Kakai. The ICPAK chairman explained that the Finance Bill, 2024 proposal to introduce a motor vehicle tax of 2.5 per cent of the value of the motor vehicle will have a negative impact on transport and logistics industry that may opt to pass additional cost to their customers thus escalating the cost of living. Kakai said the proposal comes against the backdrop of revised insurance premium rates and high fuel prices, inevitably shoring up the cost of operating motor vehicles in Kenya. "It is also important to note that the motor vehicle tax, unlike advance tax on commercial vehicles, cannot be offset against income tax payable," he said. He warned that the proposals to increase excise duty from 15 per cent to 20 per cent on telephone and internet data services, fees charged for money transfer services by banks, money transfer agencies and other financial services and fees charged for transfer services by cellular phone may lead to a decrease in the number of transactions thus may see a decrease in the excise duty collection. However, Kakai said ICPAK supports the introduction of a minimum top-up tax to align with the international tax regime. ICPAK supported the Pension Contribution limit that has been increased to Sh30,000 per month from Sh20,000. "Unlike before, the contributions paid for Affordable Housing levy and SHIF is set to be an allowable deduction and not treated as a relief," he said. "The transfer of business as a growing concern is now VAT exempt implying that transfer of businesses will be less costly," said Kakai.

Accountants oppose new tax on bread, motor vehicles in Finance Bill 2024

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Accountants oppose new tax on bread, motor vehicles in Finance Bill 2024

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