Kenyans warn new punitive tax proposals will hurt investments

National Assembly Finance Committee Chairman Kuria Kimani (right) and vice chairman Benjamin Langat during the public participation on the Finance Bill 2024. [Boniface Okendo, Standard]

More Kenyans continue to voice their opposition to the proposed Finance Bill 2024, with many terming the tax proposals as punitive and retrogressive.

On the final day of submissions and public hearings in Nairobi that was characterised by heckling and criticism, Kenyans asked the Committee on Finance and Planning to have the Parliament amend or wholly discard the proposed Bill.

Julius Wachira, one of the speakers who took to the podium to make his submission on the proposed Finance Bill, said many Kenyans expected protests on different proposals that are likely to make life more difficult for Kenyans.

Contrary to that, and possibly in defiance, Wachira only spoke for 40 seconds saying, “I will not make my submission, as it will not be taken anyway. I made a submission the previous year, but it was not factored in the final document.”

Sadly, this could be the fear of many Kenyans, as evidenced by the low turnout on the final day of public participation in the Finance Bill 2024.

Anglican Canon Charles Kariuki said that if the Bill is not amended, it will confine many Kenyans in unfortunate situations, “as residents of Jerusalem.”

Coming at a time when Kenyans are grappling with tough economic times, the Canon who represented the National Churches Council of Kenya (NCCK) said Kenyans approached the Finance Bill 2024 with hopes for a better future.

“Kenyans were shocked to find a raft of new and increased taxes, yet without support measures to enhance their income generation. The provisions in the Finance Bill 2024 are bound to further retard economic growth and impoverish Kenyans.

NCCK has asked that the motor vehicle tax be deleted in its entirety, pointing out that it is double taxation, considering that the vehicle was taxed at purchase, and attracts operational taxes through fuel, services, and other consumables.

“It will hinder further penetration of insurance by making acquisition expensive, lead to increase in transport of goods and people, will increase poverty,” the Canon said in his submission.

NCCK further rejected the introduction of Eco Levy, saying it indiscriminately targets all products, penalising goods that do not hurt the environment.

This too, he says will be double taxation as Kenyans already pay carbon tax through excise duty on fuel.“It will raise the cost of doing business in Kenya, leading to reduced operations and will unduly increase the cost of living” Canon Kariuki said.

The NCCK also wants the introduction of VAT on bread to be deleted in its entirety, as the commodity is a staple food in the country, “especially for low-income earners. The taxation will raise the cost of living with devastating impact on the economic welfare of the citizens”.

Nakuru County Civil Society Forum (NACCSOF) also rejected the proposed 2.5 per cent motor vehicle tax and recommended that it be deleted in its entirety.

With the sector employing a good chunk of Kenyans, Steven Kihara, representative of the youth in Nakuru’s Rongai constituency said that the proposed Bill will lead to job losses, and will have adverse effects on the insurance industry.

“This tax will burden majority of Kenyans who will bear the cost that will be passed onto them by public transport,” NACCSOF said.

Public transport

In addition, the youth group has said that the public transport system in Kenya is not efficient enough to accommodate everyone and their needs.

“The cap of Sh100,000 seems to favour luxury car owners thus increasing already existing inequalities. This increases the burden on the owners of motor vehicles who are already paying IDF, custom duty, excise duty, VAT on the purchase, and fuel levy at a rate of Sh18 per litre. Generally, any policy actions on climate change should be based on a just transition, where the fovernment should provide viable alternatives,” NACCSOF added.

The proposed Finance Bill outlines the introduction of a 16 per cent VAT on bread. the youth group recommended that bread, which is one of the most basic household commodities, be retained as zero-rated.

Kihara has said youths in Nakuru fear that the cost of making bread will consequently be passed to consumers if the proposal sails through, worsening the already unbearable cost of living.

“The increased cost of production and the resultant reduction in consumption will lead to the closure of bread-making businesses and result in mass layoffs,” Kihara said while making his submission before the parliamentary committee.

The youth have also rejected the introduction of 25 per cent excise duty on vegetable oil pointing out that it will increase the shelf price of vegetable oil and continue to worsen the already unbearable cost of living.

“This will force citizens to opt for unhealthy options that will ultimately compromise the health of the population,” Kihara said, pointing out that investment in the production of edible oils would go down due to increased cost of production.

He said it might also lead to an increase in the unemployment rates. “The cost of food and non-food items used at the household level will go up hence increasing and worsening the already high cost of living.”

The youth also said they want the proposed increase of excise duty on telephone and data services to be scrapped.

Tony Eneh, executive director, Africa Beer Group has said the Finance Bill is an important step towards rectifying the imbalance in the alcoholic beverages tax systems, by increasing the excise on spirits, reducing the excise on beer and marginally increasing the excise on wines.

Mary Wanjiru, a youth leader from Activista, representing youth in informal settlements said the motor vehicle tax should be recalled, terming it retrogressive.  “If it is to be retained, we recommend a constant value of 2.5 per cent as provided be applied on all motor vehicles to ensure the tax regime is progressive,” she said.

To ensure the consumer is protected, Wanjiru in her submission recommended that bread be zero-rated, or be fully exempt.

“The 16 per cent VAT will increase the cost of bread making it unavailable to the common citizens,” she said.

Further, Activista has recommended that the introduction of the Eco levy be abolished.