Rotich fails in Budget to make life easier

NAIROBI: Another year goes by without any change to the personal tax brackets and allowances. This was perhaps the biggest disappointment in the budget speech this year. We are now going into our eleventh year without a change in personal tax and given inflation during that period and the increased cost of living, hard pressed Kenyans will probably be worse off.

A great opportunity to make life easier for the populace was thrown away. The long awaited new Income Tax Act is scheduled to be released at the end of September and one hopes at that point the public will be given the opportunity to comment on it. It is important that stakeholder input is sought so we don’t end up with a new Act that will be repeatedly amended!

Employing graduates to enable them develop the relevant skills will now offer a tax rebate. This was a move first mooted when the President Uhuru Kenyatta was Finance Minister and will be useful in tackling youth unemployment. At least ten graduates must be engaged for a period of six – 12 months. The provisions limiting loss carry forward to the current year and the next four was a contentious issue particularly for those that had tax losses arising from investment deduction claims. The limit has now been increased to ten years which will be of great help to the power and manufacturing sector. It was pleasing to see that capital gains tax on the sale of shares in the stock exchange is to be done away with. It was certainly creating a lot of unneeded tension and issue for the market, brokers and investors.

It is to be replaced by a withholding tax of 0.3 per cent on the transaction value of the shares. This is a positive move that should bring the NSE back to the glory it witnessed in earlier years. Very few changes were seen in VAT but those that were announced were positive.

After much toing and froing, the supply of services for transit goods were brought back to zero rating which is clearly the correct treatment. Given the significant quantum of goods that simply transit the country this is a very welcome move. The new VAT Act for some reason did not include a time limit for making refund claims and that has been addressed. All refund claims must now be lodged within 12 months.

Inputs imported or locally purchased for the assembly of ICT devices will be VAT exempt – this is part of the government’s drive to encourage ICT in schools. Industrial and recreational parks will also benefit from VAT exemption on goods and services used in their construction provided they occupy in excess of 100 acres.

With the new Excise Bill, there is a move to tax products that are harmful, which include cigarettes, alcohol, sugar sweetened beverages, polluting fossil fuels, age of vehicles and environmentally damaging plastic bags. Bottled water will, therefore, now not be taxed. Plastic bag biofuel digesters will also be VAT exempt. From a tax perspective, the budget seemed to do a lot of tinkering but nothing really substantial was announced. The trend of the last few years seems to be continuing.

—Nikhil Hira, Tax Partner, Deloitte East Africa