There has been a lot of debate about The Finance Bill 2023. However, most of what the Raila Odinga led opposition (echoed by the media) are outright fabrications. In this post, we look at over 10 ways the Finance Bill 2023 is pro-hustlers and will lower the cost of living.
The Finance Bill 2023 answers two questions namely the Cost of Living and Protecting Local Industries.
Is the Finance Bill 2023 aimed at lowering the cost of living?
The answer is an emphatic Yes. The Finance Bill, 2023 has several specific proposals which seeks to lower the cost of living for all Kenyans. Here are some of the pro-hustlers’ proposals:
1. Affordable Housing
This Fund and shall be used to provide affordable houses for the many non-housed Kenyans.
The Finance Bill 2023 provides that an employer shall pay to the National Housing Development Fund established under section 7 of the Housing Act, in respect of each employee the employer’s contribution at three (3%) per centum of the employee’s monthly basic salary; and the employee’s contribution at three (3%) per centum of the employee’s
monthly basic salary.
There is a proviso that the sum of the employer and employee contributions shall not exceed five thousand shillings a month.
Is the Affordable Housing levy a Tax?
There has been misconception that affordable housing fund is a tax yet it is not. The levy is a savings plan deduction with benefits accruing to the employee. It will also enhance the national saving plan.
What benefits will therefore be accruing to an employee?
According to the Bill, some of the benefits of the affordable housing plan as per the Bill are:
Home ownership: for employees who qualify for affordable housing the contributions by the employee shall be used to finance the purchase of a home under the affordable housing scheme.
Investment Plan: For employees who are not eligible for affordable housing, upon the expiry of seven years from the date of the start of making the contributions, or after the attainment of retirement age, whichever is earlier the employee may opt to:
- Transfer contributions to a retirement scheme or convert to pension
- Transfer contributions/benefits to another registered person of their choice
- Transfer contributions/benefits to a spouse or dependent children; or
- Receive back all the contributions made in cash hence a savings plan.
IN ADDITION, all contributions made by employees to the Fund shall also get returns based on the return on the Fund.
2. Cheaper Unga
The Bill proposes to allow for the zero-rating of supply of maize corn flour, cassava, wheat or meslin flour and maize flour containing cassava flour under the VAT Act.
This shall allow Kenyans to continue accessing Unga at affordable prices. Unga forms part of the staple food for many households.
3. Cheaper Fertilizer
The Finance Bill 2023 proposes to provide exemptions under the VAT Act for fertilizers and inputs or raw materials locally purchased or imported by manufacturers of fertilizers. This shall lower the cost of fertilizer, which will in turn lower the cost of production for farmers.
This shall promote agriculture and enhance food security. The production of crops such as maize shall also lower the cost of basic commodities in particular Unga.
4. Cheaper Cooking Gas
The Bill proposes to exempt LPG from VAT. This shall lower the costs of LPG and hence ensure that many households including Kenyans in informal settlements have access to clean energy for cooking.
As it is presently, many Kenyans have no access to LPG due to its high prices.
5. Low Rent Rates
The Finance Bill 2023 proposes the reduction of applicable income tax rate on monthly rental Income from ten percent (10%) to seven-point five percent (7.5%).
The reduction shall have a trickle-down effect on the cost of rent payable by tenants as the Bill has reduced the tax payable by landlords for monthly rental income.
6. Cheaper Medical Care
The Bill proposes exemptions under the VAT Act of various medical products and taxable goods for direct and exclusive use in the construction and equipping of specialized hospitals.
The Finance Bill 2023 Kenya once enacted shall lower the cost of medical care by
Kenyans, shall promote the development of the health infrastructure and ensure access to affordable health care by all Kenyans.
7. Predictable Product Prices
The Bill aims at cushioning Kenyans from Impromptu increase on cost of basic commodities.
The Finance Bill 2023 proposes to repeal section 10 of the Excise Duty Act that gave the Commissioner General of KRA powers to adjust the specific rate of excise duty once a year to take into account inflation.
The Bill once enacted shall cushion taxpayers from impromptu increase on cost of basic commodities that is often occasioned by a review of the rate of excise duty due to inflation.
8. Tax Amnesty
The Bill provides for tax amnesty on penalties and interests for tax payers. In this regard, once enacted into law, taxpayers who have paid their tax debts but have been uncertain about applications for waiver of penalties and interest shall benefit from tax amnesty on penalties and interests.
This shall also encourage Kenyans to review their tax compliance status and make voluntary disclosure to KRA so that they can benefit from the waiver of interest and penalties.
9. Ease of Tax Obligations & Tax Refunds
The Bill seeks to allow taxpayers to offset tax overpayments against past, current and future tax liabilities. Presently, a taxpayer can only apply to offset tax overpayments against future liabilities.
Further, the Finance Bill 2023 provides that approved tax refunds shall be repaid to taxpayers within 6 months, rather than the current two years.
These amendments shall ease tax obligations for tax payers who have tax overpayments and further allow Kenyans to easily access tax refunds which can be invested into beneficial and income generating projects.
10. Tax Reliefs to Retirees
The Bill proposes to provide tax reliefs to persons who contribute to post-retirement medical funds.
This is to encourage retirees to enroll to post-retirement medical schemes hence guaranteeing their access to medical care postretirement.
11. Better Tax Collection
The Finance Bill 2023 proposes to target high income earners who earn above Kshs. 500,000 per month to pay individual tax rates that is PAYE of 35% up from the current 30%.
This shall increase the tax collected by government which shall in turn be used to provide services to all Kenyans including affordable healthcare.
The proposals are also designed to reduce inequality in society by cushioning low-income earners from tax obligations.
Will the Finance Bill 2022 Protect Local Industries?
Yes, the Bill has several proposals which seek to protect and promote local businesses, boost our manufacturing sector and create employment opportunities for the youth.
Some of them are:
12. Promotion Of Local Businesses and Jobs
The Bill proposes to impose additional levies on imported products such as steel, paper, plastics and paints among other goods.
This shall protect local manufacturers from unfair competition and further protect the job market created by local businesses.
13. Promotion of the Manufacturing Sector
The Bill proposes to provide for export and investment promotion levy, on all goods specified in the Third Schedule of the Miscellaneous Fees and Levies Act, 2016 imported into the country for home use.
The purpose of the levy shall be to provide funds to boost manufacturing, increase exports, create jobs, save on foreign exchange and promote investments.
14. Promotion of Jua Kali Sector
The Finance Bill 2023 also seeks to impose excise duty for imported furniture excluding furniture from the EAC.
This shall protect and promote local production, including our jua kali sector engaged in the manufacture of furniture.
15. Promotion of Local Fishing Sector
The Bill imposes excise duty on imported fish and hence seeks to protect the local fishing industry which provide a source of living for many Kenyans.
16. VAT Exemptions for Businesses
As it is presently, VAT is payable by transfer of business as a going concern. These tax obligations have hindered business growth through restructuring.
The Finance Bill once enacted shall provide for VAT exemption for transfer of business as going concern.
This shall spur business restructuring and encourage Mergers and Acquisitions.
17. Reduced Import Fees
The Bill has proposed the reduction of the rate of Import Declaration Fee from 3.5% to 2.5% of the customs value of imported goods.
Further, the Finance Bill 2023 proposes a reduction of the rate of the Railway Development Levy from 2% to 1.5%. This shall in turn reduce the cost of importation of goods and hence shall spur businesses engaged in the sale of imported goods.
18. Exempt from Interest Restriction Rules
The Bill proposes to exempt the interest accrued from local borrowing from the interest restrictions rules.
Consequently, when computing the restricted interest, a person will only consider interest paid to non-resident persons in excess of 30% of earnings before interest, taxes, depreciation and amortization.
The proposal should encourage companies to borrow from local financial institutions and this should promote the growth of our local financial sector.
19. Lower tax for Vehicle Assemblers
As it is presently, the Income Tax Act provides a reduced rate of corporation tax of 15% for 5 years from the commencement of motor vehicle assembly operations.
The Finance Bill 2023 proposes a further extension of the reduced rate to a company which achieves a local content of 50% of the ex-factory price value.
The Finance Bill defines the local content to mean parts designed and manufactured in Kenya by an original equipment manufacturer operating in Kenya.
This will encourage motor vehicle assemblers to utilize local content and benefit from the preferential corporate tax rate.
20. Promotion of The Tourism Industry
The exemption of aircraft, spacecraft and parts thereof from VAT shall ensure the revival of the airline industry which shall in turn expand the tourism market.
The tourism industry is one of the country’s key economic drivers and contributes to over 8% of the country’s GDP and is also a source of livelihood for many Kenyans through employment in the hospitality industry.
21. Incentives for Startups
The Finance Bill 2023 proposes to defer tax on shares received by employees in lieu of cash emoluments from an eligible start up. The amendment seeks to encourage start-ups to allow employees to benefit from the growth of the company by issuing employees with shares.
This shall encourage the development and growth of start-ups which have been one of the engines of growth and innovation in many economies around the world.
Start-up businesses shall also address issues of unemployment in the country as the incentives shall encourage the youth to start-up small businesses.
22. Ease of Doing Business
The Finance Bill 2023 provides that the Commissioner-General of KRA may establish a data management and reporting system for the submission of electronic documents including detailed transactional data relating to those documents.
This shall enhance the ease of doing business as it will allow people to submit documents on various transactions electronically and ease the administration of our taxes.
Above are just some of the ways the Finance Bill 2023 proposes to make life easier for Kenyans. Contrary to the propaganda, there is so much to support in the Bill.
To make an independent decision, however, please go through the whole Finance Bill 2023 Kenya.
NOTE: This piece has been compiled by Hon. Anthony Kimani Ichung’wah, Leader of Majority, National Assembly.