The fate of the Finance Bill, 2020 now lies with President Uhuru Kenyatta after Parliament on Tuesday passed a raft of new taxation measures set to kick in on July 1.
The new measures are expected to raise the bulk of the money to fund the government’s Sh2.8 trillion spending plan for the 2020/21 financial year as the country battles the ravages of the coronavirus pandemic.
Among the proposals that the National Assembly gave the nod to is the zero-rating of value-added tax on wheat and maize flour, expansion of the rental income tax, additional tax on beer, the much-contested digital tax and introduction of toll stations on key highways.
The Capital Markets Authority (CMA) will also regulate private equity and venture capital firms that have access to public funds, including pensions.
The Bill is now awaiting presidential assent after which it will become law, paving the way for the implementation of the new taxes when the new financial year kicks in on July 1.
However, the commencement date could change or delay if the President fails to assent to the changes made to the proposed law by the MPS, including removing the tax on pension, a levy on cooking gas and the controversial excise duty on betting.
Uhuru has the prerogative to assent to the bill as passed by the lawmakers or send it back to them with proposed amendments.
Should he okay the amendment by legislators to remove the betting tax on winnings, it would be a major coup for the industry, with several betting companies forced to close shop last year in a longstanding row with the Kenya Revenue Authority (KRA) after Treasury imposed a 10 per cent excise duty on winnings. This was later hiked to 20 per cent.
KRA had been demanding billions of shillings from betting firms based on the gross amount of the payout to punters, including the staked amount.
Among the newest recommendations is the Bill is the introduction of a minimum tax of one per cent on gross turnover.
The tax targets all persons regardless of their fortunes, profits or losses. This, according to finance committee Chairman Joseph Limo, could raise about Sh21 billion.
“Through these amendments, we have returned the benefit to pensioners. We have had a lot of cries from the elderly over the proposal to tax them. What we are doing here is to save the pensioners,” said Limo.
The National Assembly also opposed proposals by Treasury to raise taxes from pensioners.
The Treasury was aiming to introduce a levy on taxes on income from the National Social Security Fund (NSSF) and to include liquefied petroleum gas (LPG) among goods on which VAT could apply.
Materials for the manufacture of automotive and solar batteries had also been proposed for removal from the zero-rating category.
The National Assembly adopted reforms to move the supply of maize flour, wheat and cassava flour from exempt status into the zero-rated category alongside milk and bread.
This is expected to offer relief to consumers through reduced retail prices, with millers recouping the exempted VAT. Treasury has to contend with a Sh774 billion deficit, according to the budget statement delivered by Cabinet Secretary Ukur Yatani two weeks ago.
The deficit will be compensated through both internal and external borrowing.
The upper limit of payment of the residential income tax was lifted from Sh10 million to Sh15 million.
This limit was extended to grant landlords with a rental income of between Sh10 million and Sh15 million the more concessional tax rate of 10 per cent. The simplified monthly income tax became effective in January 2016.
Those who conduct their businesses online are also set to feel the pinch of a digital service tax of 1.5 per cent that will be levied on gross transaction value.
The tax is expected to yield for Kenya Sh2 billion.
Legislators also passed the inclusion of several items that were exempted from the VAT to the 14 per cent charge. These included some helicopters, tractors, stoves, cookers, and equipment for the construction of plastic recycling plants.
In a blow to brewers, MPs voted to lower the coverage of excise duty on both beers and spirits to products whose alcohol strength is anything above six per cent.
The legislators also approved the proposal for road tolling, effectively paving way for the implementation of Nairobi Expressway and Limuru–Mau Summit Road.
The two multi-billion-shilling projects are set to be done under public-private partnership (PPP), where private investors will pump their resources and then allowed to collect toll fees to recoup their investments.
For instance, in Nairobi, motorists will have to pay Sh300 to by-pass the ever-busy Uhuru Highway by using the Nairobi Expressway running from Mlolongo to James Gichuru Road, in Westland.
The government is planning a similar model from Limuru to Mau Summit to help motorist from Nairobi to the western parts of the country beat traffic along the route.
The new law introducing pay-for-use roads was contained in the recommendation on Finance Bill 2020 and was approved by the House on Tuesday.
National Assembly Transport and Public Works Committee Chairman David Pkosing said the passage of the law will now allow the government to enter into PPP framework in coming up with roads to revamp the country’s transport sector.
“The thinking in coming up with the Nairobi Express Way from Mlolongo to James Gichuru is to allow private investors pump their money then allow them to recoup their investment by collecting toll charges,” said Mr Pkosing.