Treasury’s new tax proposals seek Ksh.178B as public hearings begin

The focus will primarily be on the Tax Laws Amendment Bill 2024, which aims to generate over Ksh. 178 billion in additional revenue for the 2024/2025 budget. 

The Treasury is banking on this bill to bridge the budget deficit created by the withdrawal of the Finance Bill 2024 and to fund critical development projects across the country.

The proposed tax adjustments, whose public participation process begins in Isiolo, seek to revise all major tax categories, including excise duty, income tax, and value-added tax (VAT). 

Among the notable changes is the introduction of the Significant Economic Presence Tax, replacing the Digital Service Tax. 

This new tax targets non-resident individuals and businesses earning income in Kenya, applying a 6% tax rate on foreign earnings. 

Businesses operating in the digital marketplace, such as ride-hailing apps, will also be impacted, with a proposed 10% levy on their gross turnover classified as taxable profit.

Other proposed measures include a 16% VAT on air tickets purchased through travel agents, which are currently exempt.

 Entry fees for national parks and reserves, along with tour operator services, will also attract a 16% VAT if the proposals become law. 

At the same time, to support agriculture, the Treasury plans to exempt pest control products, fertilizers, and raw materials used in their production from VAT, aiming to reduce manufacturing costs and promote affordability in the market.

To alleviate financial pressure on employees, the Treasury has proposed that contributions to the Housing Levy and Social Health Insurance Fund (SHIF) be treated as allowable deductions. 

This adjustment means income tax will apply only after these deductions are made. For instance, an employee earning a gross salary of Ksh. 50,000 will now be taxed on Ksh. 45,715 instead of Ksh. 47,840, resulting in a savings of Ksh. 525 under the new system.

Additionally, the Tax Procedures Amendment Bill 2024 proposes extending the Tax Amnesty Program from June 30, 2024, to June 30, 2025. 

This extension would allow taxpayers to regularize their tax compliance without facing penalties if the bill is enacted.

The public hearings for these proposals will be conducted by the National Assembly’s Finance and Planning Committee, beginning November 18 in various regions across the country. 

The hearings will culminate in final sittings in Nairobi at the Kenyatta International Convention Centre (KICC) from November 25 to November 28.

These hearings provide Kenyans with a platform to share their concerns and influence the final versions of the bills. 

The proposed tax changes are expected to have significant implications for businesses and households across the country, making public participation a critical component of the legislative process.