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Big blow for poor people as prices of goods go up

By Moses Michira | Published Fri, June 15th 2018 at 00:00, Updated June 14th 2018 at 23:07 GMT +3
Kenyan Shilling coins

In summary

  • From kerosene to 'mitumba', Kenyans will have to dig deeper into their pockets to pay the taxman
  • But rich breathe sigh of relief as Rotich fails to impose anticipated tax hikes, including on salaries exceeding Sh750,000

Kenya's poorest emerged the biggest casualties of the proposed steep taxation measures that will see petrol and kerosene priced the same.

A litre of kerosene will sell at nearly Sh100 by July 1, after the new taxes come into force to amplify the effects of yesterday's pricing review by the Energy Regulatory Commission.

The painful decision is informed by a need to tackle runaway adulteration of diesel because while kerosene is more flammable, it is way cheaper owing to friendlier taxation.

National Treasury Cabinet Secretary Henry Rotich also plans to increase the cost of sending money via mobile phone, a platform widely used for transferring small amounts by millions of Kenyans.

“The revenue realised from these measures shall be used to fund universal healthcare,” said the CS of the Budget that was themed to fit into President Uhuru Kenyatta's development plans.

Universal healthcare is among Uhuru's 'Big Four', the others being manufacturing, affordable housing and food security.

All traders will now contribute to the national kitty through a presumptive tax equal to 15 per cent of the Business Permit Fee.

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M-Pesa agent

An M-Pesa agent operating in Nairobi, for example, will pay an additional Sh1,350 per year on top of the usual Sh9,000.

The Kenya Revenue Authority has found it difficult to collect turnover tax, which has now been replaced with the presumptive tax.

“I propose to amend the Income Tax Act to replace the turnover tax with presumptive tax based on the business permit or trading licence fees at a rate of 15 per cent in order to ensure that the sector contributes towards the economic agenda of the country,” Mr Rotich said in his speech.

In addition, tough measures have been introduced that will sharply raise the cost of second-hand clothes and shoes, levying Sh500, or 35 per cent of the value, as import duty per unit. It was not immediately clear if the unit meant a piece of clothing or a pack.

While the justification is that the measure is protectionist and intended to promote local production, it is obvious that the immediate impact will again be felt by society's poor.

These were among the painful taxation measures, which although anticipated - owing to the financial need to fund the President's "legacy" - the impact could be disproportionately stacked against the poor.

In contrast, Rotich spared the wealthy from huge taxes proposed for profits earned from the sale of assets including land and houses, in a last-minute change influenced by the highly-remunerated legislators.

High-income earners were also spared a new top tax rate of 35 per cent for monthly salaries exceeding Sh750,000.

The CS told the relieved MPs that the proposals had been shelved following "public consultations".

“However, members of the public raised concerns on these proposals and were of the view that the higher rates are not appropriate at this time. We have considered these concerns and resolved to revert to the rates contained in the current Income Tax Act,” he said.

Rotich cited the same reasons for shelving the proposed increment on Capital Gains Tax, a levy on profits earned from selling property, to 20 per cent.

Buyers of fuel guzzlers for personal use with engine capacities exceeding 2,500cc (diesel) and 3,000cc (petrol) will however spend a little more after the excise duty was increased to 30 per cent from 25 per cent of the customs value.  [email protected]  

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