The government has proposed a raft of tax measures in The Finance Bill 2023 that did not anchor well with majority of Kenyans. From raising the top rate of income tax to 35 percent, a housing levy of 3 percent, more excise duty on imported goods, among others.
These tax rises will bring government closer to balancing its books. Citizens cannot be expected to welcome them but they can at least understand their necessity.
Users of cooking gas will enjoy some relief as Treasury proposes to add Liquefied Cooking Gas (LPG) to the list of items that are VAT exempt. VAT on cooking gas was introduced by the Finance Act 2022 at a lower rate of eight percent.
Taxpayers who have huge tax debts will get a chance to get a waiver of any accruing penalties and interest if they declare principal tax that accrued up to December 31, 2022, and pay the principal tax by June 30, 2024.
Read: What You Need to Know Inside Finance Bill 2023
Furthermore, taxpayers that had declared and paid their principal tax liabilities for up to December 31, 2022, can rest easy as the Kenya Revenue Authority will be required to refrain from collecting the interest and penalties from such taxpayers.
In addition, taxpayers can expect reduced prices for medicines because the government intends to give a variety of tax incentives to encourage local manufacturing of medicines.
Taxpayers can look forward to a faster refund of overpaid taxes if the proposal to reduce the time taken to refund an already ascertained tax refund, from two years to six months, is implemented.
VAT on petroleum will increase from 8.0 percent to 16 percent, meaning the price of fuel at the pump will increase.
This not only affects motorists but also ordinary Kenyans who use kerosene to cook or light their homes.
Ordinary taxpayers will also be affected by the introduction of the mandatory contribution to the National Housing Development Fund.
The contribution, which is made from a deduction from the employee’s salary, will further reduce their disposable income.
The Finance Bill has also proposed changes to the Income Act requiring some taxpayers to remit certain taxes within 24 hours of collection. These include betting firms and landlords’ rental income, unlike in the current situation where they are required to remit before the 20th day of the following month.
Perhaps to the relief of consumers and businesses, Treasury has proposed doing away with the annual inflation adjustment on excise duty by repealing Section 10 of the Excise Duty Act (2015).
The section allows KRA to increase excise duty on different products to cater for inflation. This has in the past affected prices of such products as fuel, alcoholic beverages, cigarettes, bottled water, fruit juices and confectionery.
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