By Imali Ngusale
The odyssey of broadening the Kenyan tax net has been met with uproar and rage owing to the hauling proposals in the Financial Bill 2023.
The Bill has so far been declared as one of the most contentious levies in Kenya by CSOs representatives and some Members of Parliament
“The 2023 Financial Bill is a vicious attempt to turn Kenyans into paupers,” said Robert Mbui, the National Assembly Deputy Minority Leader.
Members from the Civil Society Parliamentary Engagement Network (CSPEN) in Kenya also took a deep dive on the Bill and noted with concern that the Bill had some contentious clauses.
To begin with, the Bill seeks to increase the P.A.Y.E (Pay As You Earn) tax rate from 30% to 35% on anyone earning above KES 6,000, 000 per annum. This essentially means that anyone earning above Kshs 500,000 or USD 5000 per month will have to part with 35% of their income
Additionally, every Kenyan will have to contribute 3% of their salary income towards affordable housing.
For every 3% an employee contributes, the employer will be required by law to save an extra 3%. This means that it will be expensive for employers to increase the number of employees as they will have to pay 3% for each, should the Bill be enacted to law.
Speaking at the CSPEN review of the Financial Bill at the Norfolk Hotel in Nairobi, Cuba Ngondi from International Budget Partnership (IBP) said “If the government is going to increase the taxes on its citizens it should at least tighten its expenditure belt by reducing unnecessary cost,”
In his view, the Kenyan government needs to cut costs before increasing employee taxes. Cuba also underscored that there are unaccounted expenses that make it challenging to blindly consent to the sincerity of the government.
With the same breadth, Evans Juma from the Institute of Certified Public Accountants of Kenya (ICPAK) said that “The government must operate within the confines of the national budget and available resources.”
Juman noted that Kenya has a colossal fiscal deficit of approximately Kshs 768 Billion.
“This fiscal deficit,” said Juma” Must be funded either through borrowing or increasing taxes for more revenue,”
Juma however noted that with increased VAT of 16% on petroleum products the economy is bound to suffer a serious beating particularly because the other sectors of the economy are dependent on it.
Retrospective of this view, the cost of transport, manufacturing, tourism, health, and aviation is bound to escalate because of the ripple effect of fuel prices. Additionally, the aforementioned sectors may also be swollen in terms of their contribution to the overall GDP.
Juma also argued that Kenya’s debt repayment obligations have made it mandatory for the government to fast charge on the consolidated funds.
He however cautioned the government to put in place robust measures that would increase revenue generation, reduce expenditure and improve service delivery but not harm the already highly taxed citizens.
This notwithstanding, Gitonga Wambere from Mzalendo Trust, said that he believes the Finacial Bill sought to stabilize the economy.
Wambere insisted, “The Bill is necessary, however stated that it needed to have austerity measures that are feasible and realistic”
Arguably, it seems that austerity in Kenya seems to come at a very hefty price because the Financial bill also seeks to increase the excise duty on betting and gaming from 7.5% to 20%.
In particular, the Bill seeks to increase tax on gaming, lottery, prize competition, gambling, or similar transaction under the Betting, Lotteries, and Gaming Act need to be remitted within 24 hours.
Additionally, the Bill seeks to amend Clause 2(b) on Digital Content monetization, which literally means that cryptocurrencies may also not be spared.
The Bill seeks to amend the Digital Asset Tax to include advertisements on websites, social media platforms, or similar networks by partnering with brands including endorsements from sellers of such brands, sponsorship, affiliate marketing, subscription services, content creation, and crowdfunding.
But perhaps what is most antagonistic is that the Digital Asset Tax seeks to increase duty on digital transfers like Mpesa to the bank and vice versa charges.
If the Kenya Kwanza government accepts the 2023 Financial Bill without heeding to the people’s voice, then the opposition may have new tricks to play power politics in one of Africa’s most expensive countries to live in.