Tuesday is last chance for MPs to save face on unpopular tax plans

Kenya Kwanza PG held at State House, Nairobi. [PCS]

This is a make-or-break week as as Parliament resumes on Tuesday, with legislators scheduled to consider amendments to the controversial Finance Bill 2024, which has put the country on the edge.

This follows last Thursday’s proceedings where a majority of Members of the National Assembly voted for the advancement of the Bill to the committee of the whole House to the chagrin of an outraged public, which has been calling for the rejection of the Bill in its entirety.

Parliament is now expected to consider clauses in the Bill and at the same time consider ammendments proposed by the House Finance Committee.

Key among the proposals by the committee, through its report on the Finance Bill, is an increment on the road maintenance levy charged on all petroleum fuels imported to Kenya for home use.

Another proposal is for the increase in the rate of import declaration fees from 2.5 percent to 3.5 percent in a bid to increase revenue collections.

The Kimani Kuria-led National Assembly Finance committee has argued that the reduction of the rate of import declaration fees from 3.5 per cent to 2.5 per cent in Finance Act, 2023 occasioned a significant revenue loss amounting to at least Sh10 billion, hence hurting the implementation of the 2023/24 financial year budget.

There is also a proposal for a one per cent increase on the Railway Development Levy (RDL) where, according to the Bill, the surplus funds will be committed to the development of an electric light rail system.

“We have looked at other ways like how much we are losing in terms of our tax expenditures and proposed a tax increment of 1 per cent on the railway development levy and the import declaration levy to bridge the resource gap that we have lost on motor vehicle tax,” said Kuria.

The committee has also proposed imposing of the Export and Investment Promotion Levy on articles of leather, imported footwear, denatured ethyl alcohol, ceramic sinks, and wash basins, among other products.

“On Export Investment Promotion Levy, the Committee observes that there is a consistent trend of a decline in exports from the country and a significant rise in imports even for goods manufactured locally. In this respect the objective of the Export Investment Promotion Levy is to protect the local manufacturing sector from unfair trade practices, increase the competitiveness of Kenya’s Manufacturing sector and to foster a sustainable and inclusive export sector,” reads the report.

On the other hand, the Finance committee has proposed the removal of key contentious proposals in the Bill following mounting pressure from an already burdened public.

In what is seemingly a move to win back the support of outraged hustlers, the House team has called for the scraping of an earlier proposal to impose a 16 per cent VAT on bread, noting that the move would allow the commodity to remain affordable.

And in consideration of the plight of farmers and manufacturers, the committee has proposed zero rating of inputs and raw materials supplied to manufacturers of agricultural and pest control products, transportation of sugarcane from farms to milling factories, supply of locally assembled and manufacture of mobile phones.

It has also proposed the removal of an earlier clause seeking to impose excise duty on vegetable oil and another seeking an increment on internet and mobile money transfer charges. An earlier proposal to impose VAT on financial services and foreign exchange transactions has also been removed.

“To address the concerns of a significant majority of stakeholders and to contain the prices of certain critical goods, the Committee proposes to remove imposition of the levy on diapers, tyres of motorcycles, bicycles, wheelchairs three wheeled motorized vehicles (tuk tuks) and reduce the rate of eco levy for certain finished goods,” reads the committee’s report on the Bill.

Parliament is also expected to consider amendments introduced by the members that could either impose further taxes or slash those proposed by the Bill.

Notably, the Bill, having passed through the first and second reading stage, will proceed to the third reading where it will be read with all amendments and given final approval by the House.

It will then proceed for Presidential Assent and implementation.