Finally, the National Treasury has released the Finance Bill 2022, which reveals an uncomfortable truth that President Uhuru Kenyatta’s last budget is not pro-mwananchi after all.
The Bill proposes sweeping changes to the country’s tax laws— hitting not just sinners such as drunkards, smokers and gamblers but also hungry and innocent ugali and chapati lovers as well as boda boda operators.
Tabled in the National Assembly by Gladys Wanga, the chairperson of the Finance and Planning Committee, the government also proposes to ratchet up excise duty, popularly known as sin tax, on betting, gaming and lottery by almost three times from 7.5 per cent to 20 per cent.
Tax relief enjoyed by suppliers of maize flour, cassava flour and wheat flour has also been yanked away in the Bill with unga now attracting 16 per cent value added tax (VAT), or the consumption tax.
The International Monetary Fund and the World Bank have been pushing for the reduction of tax expenditure - where the government refunds suppliers for VAT on zero-rated goods.
“The Government will continue to rationalise tax expenditures and retain those whose intention is to promote investments and ensure sustainability and value for money from our resources,” said Yatani in his budget speech on Thursday, adding that there was a significant decline in the level of tax expenditure from 5.17 per cent of Gross Domestic Product (GDP) in 2017 to 2.96 per cent as a per cent of GDP in 2020.
“We shall continue to review the existing tax expenditure in order to boost the tax revenues.”
Slapping maize flour, wheat flour and cassava flour with 16 per cent will hit Kenyans already grappling with high cost of living hard.
The booming boda boda business, which, besides its gangsterism, has been a source of employment for millions of youths, will also be jolted should lawmakers pass the Bill into law.
In the proposed changes, a unit of imported motor cycle will be slapped with an excise duty of Sh13,403.64 compared to the current rate of Sh12,186.
This might be a double blow for boda boda operators who might also be expected to pay third party insurance should the changes proposed by Yatani be passed into law.
In the Finance Bill 2021, now the Finance Act 2021, Yatani had proposed to increase taxes on bread and imported boda bodas.
However, MPs, not only reversed these proposals, but also zero-rated VAT on bread, maize flour, wheat flour and cassava flour in what was hailed as a pro-Wanjiku move.
Now, Yatani wants these changes by legislators reversed.
With bottled water fast turning into a crucible for micro, small and medium enterprises (MSMEs), they have unfortunately found themselves on government’s radar. The Bill proposes to hit a litre of bottled water with an excise duty of Sh6.60 up from the current rate of Sh6.03.
It is not just those dealing in bottled water that have been targeted by the new tax measures through which the National Treasury seeks to raise an additional Sh50.4 billion as Yatani looks for money to finance a Sh3.32 trillion budget.
Manufacturers of alcohol, cigarettes, fruit juices, soft drinks, ice-cream, cosmetic and beauty products will be forced to sell their goods at a higher price after Yatani increased excise duty on these items by 10 per cent.
“Mr Speaker, in the Bill, I have also proposed to increase the specific rates of excise duty for a number of products by 10 per cent to generate additional revenue for the Government,” said Yatani, even as he excluded petroleum products from this increase, citing the recent global increase in oil prices.
Should the proposals become law, a litre of beer will attract an excise duty of Sh134 from the current Sh121.8; the same quantity of spirits such as whiskey, gin and rum will be slapped with a higher sin tax of Sh335.30 up from Sh287.7 and Sh229 for wine compared to the current rate of Sh208.2.
A litre of fruit juice will attract a sin tax of Sh13.3, up from the current Sh12.17 should the Bill become law.
The government has also proposed to introduce a 15 per cent sin tax on ice-cream; 10 per cent excise duty on plastic articles for packing goods including stoppers, lids, caps and other closures of plastics.
Excise duty on cosmetic and beauty products as well imported jewelry has been increased to 15 per cent from 10 per cent.
There is also a proposal to slap imported potatoes, including prepared or preserved French fries popular with American fast-food Kentucky Fries and Chicken, with a 25 per cent excise duty.
Also on the losing end will be companies with tax disputes against the Kenya Revenue Authority (KRA). They will now be expected to deposit half of the disputed amount in a suspense account at Central Bank of Kenya (CBK) until their cases are resolved.
Mr Yatani also introduced excise duty on all forms of advertisements for gambling, gaming and alcohol industry, areas that in the last 10 years have been President Kenyatta’s tax cash cows.
There is a 40 per cent excise duty on electronic cigarettes and other nicotine delivery devices while liquid nicotine for e-cigarettes, popular among the urbane youths, will attract a duty of Sh70 per millilitre.
Predictably, the government has also increased duty on cigarettes with and without duty.
Surprisingly, duty on cigars, cheroots, and cigarillo has been reduced to Sh13,296.6 per kilogramme from Sh13,906.04.
The release of the Finance Bill 2022 was delayed, with some analysts speculating that the government might as well have been trying to put some things under wraps.
Yatani’s Thursday budget speech, which was analysed without the Finance Bill, cherry-picked proposals that were friendly to Kenyans, with some describing the budget as that which is friendly to mwananchi.
Significantly, Mr Yatani steered clear of announcing major new tax measures in what was aimed at avoiding a political fall-out as the country prepares for a transition election.
“We have re-prioritised public spending towards pro-poor expenditures in health, education and supporting the vulnerable segment of the population,” said Mr Yatani in a speech that was delivered in a half-empty Parliament.
Instead, Yatani has proposed to increase allocation that he hopes will reduce the pangs of hunger and offered more tax incentives to stimulate critical sectors of the economy, such as agriculture.