Finance Bill 2024: Financial gurus diaspora leaders raise their concerns

Stakeholders and diaspora organisations have rallied together and urged the government to reconsider the proposed amendments outlined in the Finance Bill 2024.

This, they note, will ensure there is a fair and equitable tax system.

Of particular concern are the potential increases in mobile money and excise duty rates, with stakeholders pushing for the maintenance of the current levels or, at the very least, a reduction in the proposed hikes.

The Finance Bill 2024 introduces several changes, including the imposition of VAT on select financial services by removing previous exemptions on transactions such as foreign exchange, cheque handling, and money securities issuance.

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Speaking at the International Day of Family Remittances event in Nairobi, Dr Shem Ochuodho, the global chairman of Kenya Diaspora Alliance, emphasised the importance of fostering enabling environments for diaspora investments and engagement in developmental projects.

“More concerted efforts should be channelled towards creating enabling environments for diaspora investments and participation in development projects, alongside engagement and empowerment actions and measures.” Ochuodho said

He called on the government to incentivise the diaspora to continue remitting and investing in the country, including in government bonds.

Highlighting the significance of remittances, Dr. Susan Koech, Deputy Governor of the Central Bank of Kenya, noted the substantial growth in remittance inflows to Kenya, reaching a record high of USD 4.2 billion in 2023.

“These inflows not only contribute to the country’s foreign exchange reserves but also play a crucial role in supporting the livelihoods of vulnerable households.” Dr Koech stated

With an estimated four million Kenyans living abroad, the diaspora represents a valuable resource for Kenya’s economic development, as emphasized by the Ministry of Foreign Affairs.

However, realizing this potential requires a solid policy framework to facilitate diaspora engagement effectively.

Cizarina Nasirumbi, Kenya Diaspora Alliance Marketing Manager, stressed the importance of a formal policy framework to remove obstacles to diaspora engagement and create an enabling environment for their participation.

“solid policy framework can facilitate a government’s outreach to the diaspora and give it a formal framework within which to operate. It creates the basis for introducing necessary legislative and policy reforms that remove obstacles to diaspora engagement (enabling environment);” she said

David Berno from the International Fund for Agricultural Development echoed these sentiments, emphasizing the need for inclusive policy frameworks involving both governmental and non-governmental actors to support effective diaspora initiatives.

“Diaspora have potential but, when operating in an informal and uncoordinated manner, their initiatives are not as effective as they could be. In this respect, their empowerment (based on their needs), as well as the establishment of enabling environments, should be supported” he said.

However, challenges remain, particularly regarding the costs associated with remittance corridors. Amb. Isaiya Kabira from the State Department for Diaspora Affairs highlighted the persistently high costs in certain corridors, posing a conundrum for both senders and recipients.

“the cost of sending US$ 500 in 2023 to Kenya was 8.3 percent as a proportion of the amount remitted from 8.4 percent 5 years ago and remains higher than the Sustainable Development Goal (SDG) 10.C.1 of 3 percent.  The Kenya-Tanzania and Kenya-Rwanda corridors remain costly at 34.1 percent and 11.5 percent, respectively – mainly through the bank channel” he stated.

As the Finance Bill 2024 undergoes legislative scrutiny, Central Bank Governor Kamau Thugge has expressed support for the proposed tax increases, citing the need to raise revenue and offset public debt.

Nevertheless, experts caution that these changes could have significant repercussions for stakeholders if implemented without careful consideration.

With stakeholders voicing their concerns, it remains to be seen how the government will respond to calls for a balanced approach to taxation that takes into account the needs of both businesses and citizens alike.