New tax policies as proposed by Finance committee and the Impact they will have on Kenyans.
New tax policies as proposed by Finance committee: Finance Chair and Molo lawmaker, Kimani Kuria, Have made major proposals on excise duty, Value Added Tax (VAT) and expanding the tax base among others.
The committee proposed that the above tax be imposed only on luxurious goods and communication services.
The also proposed that the tax be imposed on food items, commonly used basic commodities, medicine and agricultural products. If this passes, cost of some of the excisable commodities will be lowered.
The committee stated,”Provide that, the following shall apply in regard to Excise Duty. Excise duty rates imposed on products shall not exceed the optimal excise duty rate,”
“The optimal rate shall be based on studies conducted by the Kenya National Bureau of Statistics (KNBS). The optimal excise duty rates undergo public participation and approval by the National Assembly. The optimal tax rate shall be reviewed every three years,” it added.
The committee highlighted that multiple VAT rates should be imposed on commodities to cushion the country against external shocks.
Provide Multiple VAT rates to allow for an opportunity for an alternative rate as a way to cushion the economy against shocks occasioned by global trends and the adverse effects of price increases of these products.
“Provides that in addition to costs compliance and administration costs, as provided for in the draft National Tax Policy, the granting of VAT Exemptions be based on incentivizing investment and cushioning Kenyans from economic shocks,” the committee stated.
Expanding Tax base
The committee outlined that various sectors such as cooperatives did not need to be overburdened with taxes given their contributions to the country’s agricultural sector.
They stated,”Provide alternative strategies to tax the informal sectors, for instance, possible use of withholding taxes which require businesses to withhold taxes at source when making payments in hard tax sectors.”